The Prudential Regulation Authority is consulting on this. The paper sets out a very clear articulation of board responsibilities which would apply to any company, not just those regulated by the PRA. The paper provides a couple of neat summaries of the effective board from the PRA perspective:
"An effective board is one which understands the business,
establishes a clear strategy, articulates a clear risk appetite to
support that strategy, oversees an effective risk control
framework, and collectively has the skills, the experience and
the confidence to hold executive management rigorously to
account for delivering that strategy and managing within that risk appetite."
"The desired outcome from a regulatory standpoint is
an effective board, which is one that:
• establishes a sustainable business model and a clear strategy
consistent with that model;
• articulates and oversees a clear and measurable statement
of risk appetite against which major business options are
actively assessed; and
• meets its regulatory obligations, is open with the regulators
and sets a culture that supports prudent management."
The focus on risk, while obviously most relevant in financial services, might also help other companies to consider business decisions more carefully: from the perspective of negative outcomes, it is not always easy to distinguish between bad corporate governance and bad business decisions.
But the system still relies heavily on NEDs. I wonder if there is any recent research on the effect of NEDs on the boards of financial services companies over the last decade.
And I'm still struggling to understand what "culture" means.
