Principles of Corporate Governance

Abstract

This chapter reviews the principles of bank corporate governance. It discusses a case study of selected bank failures from the viewpoint of corporate governance, and present recommendations on how best to organise bank governance going forward. The chapter also reviews the experience of a sample of failed banks in the period leading up to, and during, the crash. The evidence was that corporate governance at many banks failed completely, at least with respect to points: setting strategy that accounts for the interests of all stakeholders, including shareholders, employees, customers and suppliers; and maintaining the bank as a going concern irrespective of economic conditions and throughout the business cycle. The chapter outlines an effective framework for governance infrastructure, one suited to managing risk under volatile market conditions. The financial crash and economic recession of 2007-2009 resulted in the demise of a number of banks, of varying size and systemic importance, in the US and Europe.

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