Newspaper article The Evening Standard (London, England)

Walker Calls for a Dramatic Overhaul at the Top of Banks

Newspaper article The Evening Standard (London, England)

Walker Calls for a Dramatic Overhaul at the Top of Banks

Article excerpt

Byline: Hugo Duncan

CITY grandee Sir David Walker today called for a dramatic "culture change" at the top of UK banks to prevent a repeat of the financial hurricane that plunged the economy into recession.

The former Morgan Stanley chairman said "the days of the old boys' club" were over and proposed sweeping reforms to the way banks are run including training for non-executive directors and annual elections or reelections of the chairman.

He also proposed a clampdown on pay and bonuses and called on major shareholders and fund managers to engage more productively with firms to support long-term performance rather than short-term gain.

Sir David said: "Failures in governance in banks and other financial institutions made the financial crisis much worse.

Many boards inadequately understood the type and scale of risks they were running and failed to hold the executive to high standards of sustainable performance.

"Bonus schemes contributed to excessive risk-taking by rewarding short-term performance. And shareholders failed to exercise proper stewardship."

The Walker Review, ordered by the Treasury to look at corporate governance in UK banks and other financial institutions, proposed:

A beefed-up role for non-executive directors capable of challenging an autocratic chief executive, already dubbed "the Sir Fred Goodwin rule" after the disgraced former Royal Bank of Scotland chief executive but equally applicable to Dick Fuld at Lehman Brothers.

A greater emphasis on the role of chairman, including "exceptional board leadership skills". The chairman should spend two thirds of his or her time working for the bank, "a commitment that will leave little time for other business activity".

The creation of a powerful risk committee of non-executive directors to curb risk-taking by ambitious executives. …

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