Drawing Boards: Motivations and Responsibilities in the Boardroom

Sergio Scandizzo

No kind of professional engagement has undergone the level of scrutiny devoted latterly to that of a director on the board of a large bank. Nevertheless, the rationale underlying the centrality of boards, let alone the priorities they should follow in fulfilling their duties, are far from clear-cut. The financial crisis has provided a treasure trove of opportunities to test the impact of boards on the performance of banks but, despite the large number of scholarly studies, there is inconclusive evidence that such impact was material. Regardless, regulators and legislators have produced extensive new rules and by-laws aiming at improving the ability of boards to monitor and, when necessary, restrain the risk-taking activities of banks. The key requirements are that board members are competent, knowledgeable, authoritative, independent and free from conflicts of interest. This chapter will look at how realistic such demands are, and at what can be done in practice.

WHY BOARDS EXIST

The issues surrounding the composition, activities and duties of the board of directors constitute by far the most central concern in corporate governance, and dominate both scholarly treatment and