Timeframe for approval of board members uncertain
ALMOST a year after the Central Bank's new corporate governance rules came into place, banks and insurance companies still have no clear guidance on how long it will take to get their board members approved, according to Institute of Directors boss Maura Quinn.
The comments come as senior finance executives warn the Central Bank could be inundated with director applications ahead of a December 31 deadline for fully implementing the new 'fitness and probity' regime.
The new rules, aimed at ensuring the highest standards of corporate governance and promoting board diversity, came into force for "existing boards" and new members from January 1, 2011.
Banks and major insurers were given until the end of December to make any "changes to board membership" that were mandated by the new rules, which restrict directors of banks and major insurers to sitting on just three boards.
The Central Bank declined to say how many 'fitness and probity' applications it had gotten so far this year, how long it was taking to get through them, or how many it expected to get over the coming month.
A spokeswoman was similarly tight-lipped on how many people had so far failed to get approval from the fitness and probity process and whether any breaches of the code had been detected.
"We're still very much in the honeymoon phase. . . but they really need to provide companies with a proper timeframe on how long it's taking to get people through," said Ms Quinn. "There's a danger that while people are going through the process you end up with a very light board, which can have a real impact."
Senior finance industry sources also expressed concern that the Central Bank might not be able to "cope" with the volume of applications over the coming weeks. "You could say we've had all year to do it and we have," said one, "but the reality is people leave these things until the last minute."
Industry figures are also concerned about the Central Bank's requirement for banks and major insurers to hold at least 11 board meetings a year, with some saying that the added demands were making it harder to get new directors.
A concession enabling companies to hold board meetings by teleconference is understood to have been rejected by several companies since their tax status requires their firms' business to be physically conducted in Ireland.
Ms Quinn stressed it was important for the Central Bank to review the rules' effectiveness. "We're trying to change a lot at once, we may not get this right the first time," she said.
Promoting boardroom diversity and increasing the pool of directors was a major reason cited for introducing the new corporate governance rules, which are among the strongest in the world.