The full extent of the Financial Regulator’s Consultation Paper on Corporate Governance is not appropriate or suitable for the majority of Irish credit institutions and insurers, according to William Fry. Over 140 business people, who attended this morning’s William Fry breakfast briefing, ‘Corporate Governance in the Regulated Financial Sector’, were given an analysis of the more controversial aspects of the consultation paper and discussed the requirements of creating good Boards.
Speaking at the briefing, Patricia Taylor, a Partner in William Fry’s Regulatory Enforcement Group, explained that while the paper is thorough and should be applied to larger financial institutions of systemic importance, a number of the proposals are not appropriate for smaller and medium sized banking and insurance firms as they put undue constraint and pressure on board members. “While the Consultation Paper attempts to prescribe a number of elements which are vital for large financial institutions, these requirements may stymie the sensible function of Boards of Irish subsidiaries of international financial groups if a majority of the Board, including the Chairman, is required to be independent and that Board Meetings cannot be held unless non executive Directors are in the majority. The severe restrictions on the numbers of Directorships which an individual can hold, as prescribed by the Consultation Paper, means that smaller and newer players to the market will be deprived of the in-depth skill sets of the better independent directors available.”
Professor Niamh Brennan, the Michael MacCormac Professor of Management at UCD said that the Consultation Paper “is welcomed as it will raise the bar for standards in board rooms throughout Ireland. However, it is important that regulations are not just sterile laws on paper but are matched by appropriate behaviour and the only way that this will happen is through strong enforcement. It should be remembered that many of the financial institutions had already adopted these standards and yet they did not prevent the economic crisis. Good governance is not just about the rules and regulations; rather it is about the quality of human interaction and behaviour that occurs around the board table.”
The consultation process for Consultation Paper 41 on Corporate Governance ends on 30 June 2010 and it is expected that the revised code will be implemented towards the end of the year.
