By Simon Miller

The role of chairman and chief executive should be split to protect against future financial crises according to an influential group of bankers and regulators.

In a report, Toward effective governance of finanical institutions, the Group of 30 (G30) - an international forum of public and private sector financial leaders - said that although many financial - said that although many financial sector firms had drawn lessons from the 2008-2009 crisis and implemented substantial governance reforms, "no one should presume that governance in leading financial insitutions has been fully addressed".

Chairman of the G30 Steering Committee on corporate governance Roger Ferguson Jr. commented: "The stability of individual financial institutions and the global financial system itself demands far-reaching govenance reforms on the parts of boards of directors, firm management, regulators and superviros, as well as long-term shareholders."

As a result, the group recommended that splitting the roles of CEO and chairman should be strongly encouraged.

"A combined role may be acceptable if the board appoints a lead or senior independent director with the responsibility and authority to act as though he were the non-executive chairman under circumstances that call for greater independence.," the report added.

William Rhodes, a vice-chairman of the steering committee said that the report underscored boards' crucial task in ensuring that firms took every step possible to protect against fatal risks.

"While boards should not try to manage firms, they need to be unstinting - more so in the future than many have been in the past - in their concern for reputational risks," he said.

Rhodes added: "Boards need to champion an appropriate culture within the business, be willing to challenge management, and vigorously discuss all strategic proposals, key-risk policies, and major operational issues."

Home     More News

Financial Risks Today Beta Banner

Other stories you may find of interest:

A very British Complex
Greater complexity leads to greater risks for banks according to Professor Simon Collinson, Warwick Business School and the Simplicity Partnership

Impacting on investment
With emerging markets looking for investment, Simon Miller looks at the rise of impact investment and what risks entails in this socially aware vehicle

Journey’s end for Solvency II?
Solvency II, the long-mooted new capital adequacy regime for Europe’s insurers, is nearing implementation. Graham Buck reviews its progress

This website is a part of Perspective Publishing Limited, registered in England No 2876166.