Walker Review proposes fundamental changes to strengthen bank governance
16 July 2009
The report recommends strengthening bank boards, making rigorous challenge in the boardroom a key ingredient in decisions on risk and encourages institutional shareholders to play an active role as engaged owners of banks.
The Walker Review of Corporate Governance of UK banks and other financial institutions recommends strengthening bank boards, making rigorous challenge in the boardroom a key ingredient in decisions on risk and measures to encourage institutional shareholders to play a more active role as engaged owners of banks and other financial institutions.
Sir David Walker said: “These proposals are designed to improve the professionalism and diligence of bank boards, increasing the importance of challenge in the board environment. If this means that boards operate in a somewhat less collegial way than in the past, that will be a small price to pay for better governance.”
Specific proposals include:
- Board level risk committees chaired by a non-executive
- Risk committees to have power to scrutinise and if necessary block big transactions
- More power for remuneration committees to scrutinise firm-wide pay
- Remuneration committee to oversee pay of high-paid executives not on the board
- Significant deferred element in bonus schemes for all high-paid executives
- Increased public disclosure about pay of high-paid executives
- Chairman of remuneration committee to face re-election if report gets less than 75% approval
- Non-executives to spend up to 50% more time on the job
- Non-executives to face tougher scrutiny under FSA authorisation process
- Chairman of board to face annual re-election
- Financial Reporting Council to sponsor institutional shareholder code
- FSA to monitor conformity and disclosure by fund managers
- Institutional shareholders to agree MOU on collective action
The deadline for comments is 1 October 2009
© HM Treasury
