Rebuilding Trust in Banks: The Role of Leadership and Governance (Wiley Finance)

An outline of the core principles and strategies required to restore the credibility of the global finance industry Since 2008, the global financial industry has lurched from crisis to crisis, calamity to calamity, resulting in an epic loss of public trust in banking and financial institutions. Rebuilding Trust in Banks argues that this series of disasters have usually been the result failures of leadership and governance, combined with unenforced systems of checks and balances. Often, leaders lose their way, believing their own hype and buying into their own propaganda. The more successful these leaders are initially the greater their self-confidence grows along with the certainty that they're right. The result is a dangerous hubris with no countervailing power to stop or change reckless, unethical, or self-interested strategies. This book offers a solution, with useful benchmarks for corporate governance and a global perspective. Features effective best practices for ensuring good corporate governance and responsible leadership in banking and finance Written by a renowned expert in corporate governance with more than 40 years of experience, particularly in Asia Intended for corporate leaders and board members in financial companies, as well as regulators, advisors, and students If banks and other financial institutions truly want to rebuild the trust they once enjoyed, this practical and prescriptive guide offers effective best practices that can—and should—be widely implemented throughout the industry. Rebuilding Trust in Banks Contents Preface Acknowledgments Chapter 1 Leadership: A Force for Change Napoleon—Leadership Lessons Conclusion Notes Chapter 2 Leadership: From Success to Failure Stan O’Neal Jimmy Cayne Dick Fuld Fred Goodwin Conclusion Notes Chapter 3 Setting the “Tone at the Top” Conclusion Appendix 3A Board Questions Regarding the “Tone at the Top” Notes Chapter 4 Ethics in Finance Systemic Integrity Market Integrity Regulatory Integrity Organizational Integrity Personal Integrity Duty-Based Ethics versus Consequential Ethics Ethics Are Situational Four Ethical Lenses Test 1: The Effectiveness Test Test 2: The Predictability Test Test 3: The Mutuality Test Test 4: The Self-Image Test Conclusion Notes Chapter 5 The Role of the Board: Theory and Reality Blurring of the Boundaries Role of the Chair Role of the CEO Role of Committees Why Boards Failed Conclusion Appendix 5A The Role of Board Committees Notes Chapter 6 Leadership, Governance, Strategy, and Risk Choice of Strategy Revisiting the Company Purpose Revisiting the Company Mission Revisiting the Vision Revisiting Culture and Values Environmental Analysis and Organizational Alignment Revisiting the Business Model Avoiding Cultural Risk Failure of Effective Implementation Traditional Risks Earnings Driver Risks Questions Regarding Risk Systemic Risk Reputation Risk Operational Risk Concl usion Appendix 6A Board Questions Regarding Strategy Appendix 6B Board Questions Regarding Risk Chapter 7 Developing Suitable Leaders Succession Planning Succession Planning for the Company Succession Planning for the Board Recruiting Directors Evaluating Directors Talent Management Monitoring and Evaluating Performance The Impact of Remuneration and Reward on the Suitability of Leaders Conclusion Appendix 7A Board Questions to Ensure Suitable People Notes Chapter 8 Ensuring Organizational Integrity Creating a Compatible Culture Problems of Compliance Judgment Traps and Biases Management Overrides Collusion Instituting Appropriate Controls Managing Risks Effective Internal Controls Conclusion Appendix 8A Creating a Suitable ERM Framework Notes Chapter 9 Governance: The Wise Restraints That Set Men Free Why Corporate Governance Matters Reconciling Competing Interests Keeping Great Leaders Great Failures of Governance Are Expensive Distributing Wealth Creation Equitably Three Components of Good Governance Self-Discipline Market Discipline Regulatory Discipline Overlaps, Underlaps, and Turf Wars Regulatory Arbitrage Based on Different Philosophies of Regulation Inadequate Sanctions and Penalties The Way Forward Conclusion Notes Chapter 10 Leadership with Governance: Rebuilding Trust in Banks Leadership Alone Is Not Enough Governance Failed Why Self-Discipline Failed At the Individual Level At the Organizational Level Why Market Discipline Failed Why Regulatory Discipline Failed What Is Needed to Rebuild Trust Boards Must Challenge Management Constructively Need to Reimpose Effective Regulatory Discipline Conclusion Changes in Self-Discipline Changes in Market Discipline Changes in Regulatory Discipline Reconciling Leadership with Governance Notes About the Author Index

An outline of the core principles and strategies required to restore the credibility of the global finance industry

Since 2008, the global financial industry has lurched from crisis to crisis, calamity to calamity, resulting in an epic loss of public trust in banking and financial institutions. Rebuilding Trust in Banks argues that this series of disasters have usually been the result failures of leadership and governance, combined with unenforced systems of checks and balances. Often, leaders lose their way, believing their own hype and buying into their own propaganda. The more successful these leaders are initially the greater their self-confidence grows along with the certainty that they're right. The result is a dangerous hubris with no countervailing power to stop or change reckless, unethical, or self-interested strategies. This book offers a solution, with useful benchmarks for corporate governance and a global perspective.

• Features effective best practices for ensuring good corporate governance and responsible leadership in banking and finance
• Written by a renowned expert in corporate governance with more than 40 years of experience, particularly in Asia
• Intended for corporate leaders and board members in financial companies, as well as regulators, advisors, and students

If banks and other financial institutions truly want to rebuild the trust they once enjoyed, this practical and prescriptive guide offers effective best practices that can—and should—be widely implemented throughout the industry.