Written by: Susan Revell | Chief Controls Officer-EMEA, BNY Mellon
The New Year, and January as a whole, is a time for reflecting on what we have achieved in the past year and renewing our commitments towards those aspirational and harder to reach targets that make us strive and stretch. Some might also make resolutions that encourage us not return to those not so good habits of old but don’t press me on whether I’m on track with my own.
When thinking about what the financial services industry’s New Year's resolution for 2017 could be, I think now is the appropriate time for us to renew our commitment to promoting and leveraging robust corporate governance - delivering effective and proportionate risk management; an increased focus on strategy and value creation; and continuing to see the strengthening boards’ independence, composition, and diversity.
Our industry needs to press forward with change. It remains important that we, and others involved in the developments of policies, regulations and standards across Europe, continue to work towards effective structures that will achieve truly trustworthy governance.
As Rintaro Tamaki, the Deputy Secretary-General of OECD once said: “corporate governance is not an end in itself. It is a means. It is a means to create market confidence and business integrity, which in turn is essential for companies that need access to equity capital for long term investment.”
The financial crash of 2008 was one of the greatest catalysts for driving change in corporate governance. But we all know that individuals can have short memories, corporations often have shorter horizons on which performance might be judged and priorities can shift with new demands.
I welcome the European Commission’s continued focus on corporate governance. They have recently expressed concern about the gender imbalance on corporate boards and are consulting on ways to get more women onto listed company boards. They also want to improve the transparency of the non-financial information reporting of large businesses.
These are two recent and fresh examples that corporate governance continues to evolve and enable business purpose. They also show we need to work on a wider range of topics from socially acceptable behaviors to integrity, financial reporting and audit disclosure. It is important that our approach carries on covering the full range issues in order to deliver the results we all want to see – believable and better governance that can be trusted by all.
The political and economic developments in the European Union in 2016 certainly have created new demands. The UK’s vote to leave the European Union (Brexit), and the new policies and debates in France, Italy and The Netherlands in the lead up towards their national elections, have perhaps increased the risk that corporate governance will slip down the agenda.
It is my hope that this does not happen. Trust is essential for the functioning of the banking sector. To achieve the turnaround in the public’s trust, those of us working in banking and financial services must embrace the value of sustainable business models and ethical behavior, as well as support the cornerstones of governance - transparency, fairness, accountability and responsiveness.
Demonstrable changes in the financial services are being achieved. Groups with sizeable banking and broker dealer presence in the UK, for example, have already adopted the Senior Manager’s Regime on accountability and responsibility for senior colleagues. Enhancements to the fitness and propriety of our personnel come into play in March 2017.
And on diversity, we continue to see steady progress in advancement of women on boards and senior leader pipelines. But as my colleague Laura Ahto said a few weeks ago in her blog post on women and the European economy, more needs to be done.
We in the financial services sector, along with other industries, need to engage further with the policy decision makers to ensure they can see the progress that is being made and how further improvements can be reached.
2017 is going to be a year of continued political uncertainty and change. But let us also make 2017 the year we see further great strides in corporate governance, taking our industry closer to earning the right to be trusted by society once more.