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.
Author(s): John Zinkin
Series: Wiley Finance Series
Publisher: Wiley
Year: 2014
Language: English
Pages: 318
City: Hoboken
Rebuilding Trust in Banks
Contents
Preface
Acknowledgments
Chapter 1 Leadership: A Force for Change
Napoleon—Leadership Lessons
Conclusion
Notes
Chapter 2 Leadership: From Success to Failure
Stan O’Neal
Jimmy Cayne
Dick Fuld
Fred Goodwin
Conclusion
Notes
Chapter 3 Setting the “Tone at the Top”
Conclusion
Appendix 3A Board Questions Regarding the “Tone at the Top”
Notes
Chapter 4 Ethics in Finance
Systemic Integrity
Market Integrity
Regulatory Integrity
Organizational Integrity
Personal Integrity
Duty-Based Ethics versus Consequential Ethics
Ethics Are Situational
Four Ethical Lenses
Test 1: The Effectiveness Test
Test 2: The Predictability Test
Test 3: The Mutuality Test
Test 4: The Self-Image Test
Conclusion
Notes
Chapter 5 The Role of the Board: Theory and Reality
Blurring of the Boundaries
Role of the Chair
Role of the CEO
Role of Committees
Why Boards Failed
Conclusion
Appendix 5A The Role of Board Committees
Notes
Chapter 6 Leadership, Governance, Strategy, and Risk
Choice of Strategy
Revisiting the Company Purpose
Revisiting the Company Mission
Revisiting the Vision
Revisiting Culture and Values
Environmental Analysis and Organizational Alignment
Revisiting the Business Model
Avoiding Cultural Risk
Failure of Effective Implementation
Traditional Risks
Earnings Driver Risks
Questions Regarding Risk
Systemic Risk
Reputation Risk
Operational Risk
Concl usion
Appendix 6A Board Questions Regarding Strategy
Appendix 6B Board Questions Regarding Risk
Chapter 7 Developing Suitable Leaders
Succession Planning
Succession Planning for the Company
Succession Planning for the Board
Recruiting Directors
Evaluating Directors
Talent Management
Monitoring and Evaluating Performance
The Impact of Remuneration and Reward on the Suitability of Leaders
Conclusion
Appendix 7A Board Questions to Ensure Suitable People
Notes
Chapter 8 Ensuring Organizational Integrity
Creating a Compatible Culture
Problems of Compliance
Judgment Traps and Biases
Management Overrides
Collusion
Instituting Appropriate Controls
Managing Risks
Effective Internal Controls
Conclusion
Appendix 8A Creating a Suitable ERM Framework
Notes
Chapter 9 Governance: The Wise Restraints That Set Men Free
Why Corporate Governance Matters
Reconciling Competing Interests
Keeping Great Leaders Great
Failures of Governance Are Expensive
Distributing Wealth Creation Equitably
Three Components of Good Governance
Self-Discipline
Market Discipline
Regulatory Discipline
Overlaps, Underlaps, and Turf Wars
Regulatory Arbitrage Based on Different Philosophies of Regulation
Inadequate Sanctions and Penalties
The Way Forward
Conclusion
Notes
Chapter 10 Leadership with Governance: Rebuilding Trust in Banks
Leadership Alone Is Not Enough
Governance Failed
Why Self-Discipline Failed
At the Individual Level
At the Organizational Level
Why Market Discipline Failed
Why Regulatory Discipline Failed
What Is Needed to Rebuild Trust
Boards Must Challenge Management Constructively
Need to Reimpose Effective Regulatory Discipline
Conclusion
Changes in Self-Discipline
Changes in Market Discipline
Changes in Regulatory Discipline
Reconciling Leadership with Governance
Notes
About the Author
Index
