Of Board Balance and the need for majority independent directors(in FIs)

In the issue of the 8th August Edge Magazine, there is an article "tightened governance standards see banks dipping into a shrinking talent pool". The article draws reference to the future requirements that going forward there is a requirement that FIs must have boards, the majority of which are made up of independent directors. 

One should ask,

a. What is the objective of this new requirement?

If the objective is to bring about greater diligence, then is there really a need for more independent directors, would the board being made up of a majority of non executive directors not be sufficient.

b. Will the new proposal achieve the desired results?

If the reason is that the current non executive are unwilling to raise the necessary question in undertaking their oversight role, surely the answer cannot be adding more independence but removing non performing directors. Letting them continue can only be equated with rewarding failure!

Part of the current issue with board performance is that most non executive board members keep silent, guarding their financial and non financial packages. This in my opinion is  because non executives don't fear the repercussions of non performance. In cases of action it is the executives that face the brunt of the regulators. Maybe in future when something goes wrong what the regulators must do is to charge the whole board, this will more likely to increase the board effectiveness and performance more then having a majority of independent directors. If a person has lock jaw, he has lock jaw, having more independent directors won't loosen those jaws, it will only add to more lock jaws, the newly appointed directors after sometime will adopt the herd mentality.

c. Is there really a shrinking pool of persons available?

No there really is no shortage. The truth is that even with the regulators the persons appointed must be "acceptable and part of the establishment". Those that are willing to play that role are never invited, as they are not seen as being part of "us". How can the regulator complain when they are not willing to be transparent and accept this group, if they want independent minded persons may come with some dsyfunction, but this is the trade off!. Additionally the regulators must be transparent and clear throughout the industry, they cannot keep silent and turn a blind eye to persons that are sitting on non performing companies and yet are considered acceptable to sit on FIs or even be future CEOs. Adjustments are required at both ends of the scale if they are serious and want to attract those that can play this role!

  

Governance after all is about doing the right thing, maybe what is needed on the part of the regulators is to go seek  out those that are willing to "be the pleasant irritant on the board" afford him the necessary protection and make sure that he is appointed. Trying to train persons under various programmes only addresses the technical challenges, it becomes a compliance issue and never ever addresses the cultural issue that is the objective. 

The intention is good, but the approach flawed and result in all probability not achievable!