Earlier this month, the Federal Reserve proposed changes to its guidance on corporate governance for banking organizations. The proposals suggest a new approach to corporate governance that could extend beyond the banking industry; among other things, they suggest that boards should spend more time on more important matters, such as strategy and risk tolerance, than on compliance box-ticking. However, taken as a whole, the proposals strike me as being something of a mixed bag. And some of the positive aspects of the proposals are already being subjected to attacks.
The Good News
The good news is that the Fed seems to be acknowledging that the board’s role is that of oversight and that boards are spending far too much time micro-managing compliance and should focus on big picture items such as strategy and risk. Those of us who speak with board members know that this has been a significant concern since the enactment of Dodd-Frank.