Speaking at the National Association of Pension Funds’ investment conference in Edinburgh last Thursday, Myners called on Sir David Walker, who is to review corporate governance in banking, to look into whether risk directors should have a separate reporting line to the board and whether non-executive directors should be required to have professional banking qualifications.
Myners said: “Some of the areas I hope Sir David will explore include whether we should place an additional legal obligation of bank directors and senior executives to have regard in their activities of promoting and maintaining systemic financial stability.”
He also drew attention to the amount of time that non-executive directors should be expected to devote to their roles and urged Walker to consider whether statutory reporting on remuneration should be extended to non-board positions in a bid to get greater insight into the culture and behaviour that the firm is seeking to promote.
Myners said: “Sir David will need to examine how boards should operate both in terms of their committee set-up and ensuring management is subject to effective and rigorous scrutiny. This review will raise very fundamental questions about the operation and effectiveness of the boards of our major banks.”
Myners echoed FSA chief executive Hector Sants’ comments in calling for institutional investors to take more responsibility in challenging corporate governance. He said: “Pension trustees and their ultimate investors must show they are taking governance much more seriously. We need to address familiar gaps that have been exposed.
“Shareholders are often too passive just accepting the decisions that management makes but passivity is no longer an option. Disengaged investors lead to ownerless corporations and the risk of unaccountable executives and boards running amok. This carries with it very substantial economic risks.”