Financial institutions urged to step up on corporate governance

SINGAPORE : Directors of financial institutions in Asia should play an active role in protecting taxpayers, as well as investors.
This is according to the Asian Shadow Financial Regulatory Committee (ASFCR), a group of independent experts on regional economic policy issues.
The committee said the key is in setting up a risk management committee.
World governments injected billions of dollars into their economies to ward off the global financial crisis two years ago.
A large portion of those stimulus funds, aimed at supporting banks, came from the taxpayers.
Experts said it’s important that company directors help to mitigate the risk that had been effectively transferred to those who pay taxes.
One suggestion at an industry conference on Thursday is for companies to set up a risk management committee, led by an independent chief risk officer.
A member of the Asian Shadow Financial Regulatory Committee said the risk officer would examine the risk exposure of the institution internally and help to avoid management misconduct.
"This is because unless a board takes care of its risk management in greater detail, these large institutions are more likely to fail, which will then hurt taxpayers. So in that sense, these companies are expected to protect taxpayers," said Sang Yong Park, head of the ASFRC & Dean, Yonsei University School of Business.
Meanwhile, ASFRC said Asia continues to face challenges in drawing qualified directors to sit on the board of financial institutions and companies.
Part of this is because these firms may be either state or family-controlled.
"If it’s family-owned, then the family’s value and culture somehow creeps into the corporation or institution. You have to be concerned about the influence of those family owners on the minority owners," said Jeremy Goh, Associate Professor of Finance, Lee Kong Chian School of Business, Singapore Management University.
The committee said Asia should also look into educating directors by providing more training in understanding group dynamics.
The suggestion is for 30 hours of training for newly-elected directors, and 10 hours spread over three years for experienced directors. - CNA /ls