Elderfield to press on with curbs on bank directors' jobs
Published 15/10/2010 | 05:00
The Financial Regulator Matthew Elderfield is to press ahead with plans to restrict the number of directorships bank directors can hold after deciding that too many directorships may mean board members haven't enough time to perform their duties properly.
A restriction in the number of directorships could have one unexpected outcome, pushing up pay for bank directors. When Mr Elderfield consulted on such an idea earlier this year, the chairman of Anglo Irish Bank, Alan Dukes, said restricting the number of directorships might simply mean directors would seek higher fees for the directorships they do hold.
It is understood Mr Elderfield accepts this argument, but is keen to restrict the numbers of directorships, even if it means a small increase in directors' fees at the Irish banks.
Mr Elderfield, the regulator since January, proposed in April a set of changes to the number of directorships and has been consulting the industry since then. A proposal capping the number of directorships -- possibly at five -- is to go to the board of the Financial Regulator within days, the Irish Independent understands.
Mr Elderfield has two options, he can cap the number of directorships board members hold in the banking/insurance industry, but also cap the number of directorships they hold generally in business. He is likely to exempt directorships of banking subsidiaries from his new rules. The decision on the rules is ultimately one for the Financial Regulator's board.
In his consultation paper on corporate governance in banks, published in April, Mr Elderfield said the number of directorships in banks or insurance companies, held by a director of a bank, should not exceed three. In terms of general business Mr Elderfield said any individual holding more than five directorships might not have sufficient time to fulfil their role.
However, he added: "The nature of the directorships and the time commitments required is also a factor. Hence, fewer than five directorships may also indicate a possible constraint on the ability of a director to comply.
"Where it is proposed that a director of an institution hold more than five directorships, the institution shall satisfy itself as to whether this is appropriate and seek the prior approval of the Financial Regulator,'' according to the proposals.
The regulator is understood to be unconvinced by arguments from the banks that there aren't enough potential bank directors available.
Mr Elderfield accepts that pay restraints may be a factor, but has been urging banks in private to broaden their their searches and to consider non-standard directors.
He is also anxious to see more diversity at senior management, with less reliance on so-called 'lifers' and more executives from different backgrounds.
Most of the changes planned will impact on non-executive directors.