Composition of the Board of Directors

At this stage, from reading the prior sections, the reader should be conscious about the pivotal role that the Board of Directors in the Corporate Governance of banks in the knowledge economy. From our earlier reading it emerges that the Board of Directors (BoD) needs to manage relationships with a multitude of external stakeholder groups, such as shareholders, regulators both in its home market and all those other markets where the bank operates.

From section 3 (Hidden Costs of Weak Governance) it emerges the importance of the BoD emphasising the need to develop a corporate culture of performance with integrity. It does so through its action on the CEO and senior management team to operate their relationship with the rank and file to ensure that that style of culture is built and maintained.

It also arises in the material on the Hidden Cost of Weak Governance that the BoD cannot afford to continue having a passive role in terms of obtaining information on the operation of the bank and its relationship with stakeholders. Its members need to be proactive and have the skills that enable them to achieve this. Moreover, it also arose that the digitalisation strategy of the bank needs to be clearly explained in the Annual Report and must be clear in the minds of the Board's members. This requires that they have highly developed knowledge of technology.

Multiple issues that relate to the role of the BoD emerge in the section Risks of Corruption that Arise in International Banking

. It is seen that the members of the BoD need to be well acquainted with the societal culture of the foreign countries where the bank operates. It is also evident that the members of the BoD need to ensure that management puts in place communications channels for the officers of the foreign operations to touch base when they confront situations where local ethical standards clash with those of the head office. The BoD must also ensure that strong compliance processes are not only put in place, but actually enforced. For this, it must ensure that the compliance functions have sufficient clout to hold to account the leaders of the strategic business units.

Furthermore, the BoD must ensure that its members are kept abreast of communications from critical foreign stakeholders such as the banking regulators and the tax authorities in the markets where they operate. Its members must also have the critical mind-set and financial acumen to monitor through financial reporting the cash flows and profits and question those that appear abnormal or disproportionate for a given subsidiary.

Adding to that, from material on Hidden Risks, it emerges that it is vital that the BoD intervenes to obtain the right proportion of power sharing between head-office management and that of the subsidiary, and to define the degree to which corporate strategies should be adapted to host countries. In parallel with that, the BoD must work through its relationship with the CEO and senior management team, to ensure that the culture of performance with integrity is also instilled in the subsidiaries.

Finally, from the section on Banks as Drivers of a Green Economy, it emerges that if the Principles of Responsible Banking are adopted, that target setting is realistic and that client-facing units are involved in setting those targets.

From all these requirements it can be seen that the Board of Directors will require an extensive and highly diverse set of skills that no single person will reasonably be able to master. Thus, the composition of the BoD will require diverse people with different and complementary skills, such as strategy, finance, technology and data security, banking regulations and compliance, hands-on knowledge of the culture of the markets where they operate, and many others.