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Rebuilding Trust in Banks: The Role of Leadership and Governance

Rebuilding Trust in Banks: The Role of Leadership and Governance

John Zinkin

ISBN: 978-1-118-63830-9

Nov 2013

336 pages

Description

An outline of the core principles and strategies required to restore the credibility of the global finance industry

Since 2008, the global financial industry has lurched from crisis to crisis, calamity to calamity, resulting in an epic loss of public trust in banking and financial institutions. Rebuilding Trust in Banks argues that this series of disasters have usually been the result failures of leadership and governance, combined with unenforced systems of checks and balances. Often, leaders lose their way, believing their own hype and buying into their own propaganda. The more successful these leaders are initially the greater their self-confidence grows along with the certainty that they’re right. The result is a dangerous hubris with no countervailing power to stop or change reckless, unethical, or self-interested strategies. This book offers a solution, with useful benchmarks for corporate governance and a global perspective.

  • Features effective best practices for ensuring good corporate governance and responsible leadership in banking and finance
  • Written by a renowned expert in corporate governance with more than 40 years of experience, particularly in Asia
  • Intended for corporate leaders and board members in financial companies, as well as regulators, advisors, and students

If banks and other financial institutions truly want to rebuild the trust they once enjoyed, this practical and prescriptive guide offers effective best practices that can—and should—be widely implemented throughout the industry.

Preface xi

Acknowledgments xix

Chapter 1 Leadership: A Force for Change 1

Napoleon—Leadership Lessons 13

Conclusion 17

Notes 17

Chapter 2 Leadership: From Success to Failure 25

Stan O’Neal 28

Jimmy Cayne 30

Dick Fuld 33

Fred Goodwin 37

Conclusion 42

Notes 43

Chapter 3 Setting the “Tone at the Top” 47

Conclusion 60

Appendix 3A Board Questions Regarding the “Tone at the Top” 63

Notes 68

Chapter 4 Ethics in Finance 71

Systemic Integrity 72

Market Integrity 75

Regulatory Integrity 78

Organizational Integrity 81

Personal Integrity 81

Four Ethical Lenses 90

Conclusion 93

Notes 94

Chapter 5 The Role of the Board: Theory and Reality 97

Blurring of the Boundaries 99

Role of the Chair 113

Role of the CEO 116

Role of Committees 117

Why Boards Failed 117

Conclusion 121

Appendix 5A The Role of Board Committees 123

Notes 126

Chapter 6 Leadership, Governance, Strategy, and Risk 131

Choice of Strategy 133

Avoiding Cultural Risk 144

Failure of Effective Implementation 146

Questions Regarding Risk 148

Conclusion 154

Appendix 6A Board Questions Regarding Strategy 156

Appendix 6B Board Questions Regarding Risk 165

Notes 170

Chapter 7 Developing Suitable Leaders 175

Succession Planning 175

Talent Management 186

The Impact of Remuneration and Reward on the Suitability of Leaders 193

Conclusion 194

Appendix 7A Board Questions to Ensure Suitable People 197

Notes 203

Chapter 8 Ensuring Organizational Integrity 205

Creating a Compatible Culture 205

Problems of Compliance 209

Instituting Appropriate Controls 215

Conclusion 223

Appendix 8A Creating a Suitable ERM Framework 226

Notes 241

Chapter 9 Governance: The Wise Restraints That Set Men Free 245

Why Corporate Governance Matters 245

Three Components of Good Governance 251

Overlaps, Underlaps, and Turf Wars 260

Regulatory Arbitrage Based on Different Philosophies of Regulation 261

Inadequate Sanctions and Penalties 262

The Way Forward 263

Conclusion 264

Notes 265

Chapter 10 Leadership with Governance: Rebuilding Trust in Banks 271

Leadership Alone Is Not Enough 271

Governance Failed 272

What Is Needed to Rebuild Trust 276

Conclusion 286

Notes 290

About the Author 295

Index 297