Corporate Governance and Access to Finance - ESBG

2. THE LINK BETWEENCORPORATE GOVERNANCEAND ACCESS TO FINANCEThe initial objective of Corporate Governance principles is to align theincentives of managers and shareholders in order to overcome the principal– agent problem. This approach, however, assumes that shareholders’interest is to maximize profits. In the case of financial institutions,“Corporate Governance should take account of the interest of otherstakeholders (depositors, savers, life insurance policy holders, etc)” 5 , andthe objectives of the institution need to be defined more precisely, giventhe broader impact of its activities on economic development, financialstability and social cohesion. This is particularly relevant for institutionshaving a financial inclusion objective, like WSBI member banks.This section provides an overview of the main potential interactions andmutual influences between Access to Finance and Corporate Governance,as applied in financial institutions such as savings banks. A series ofpossible links are examined and good practices are identified, withparticular regard to:(i) the importance of the mission of the institution, and the impact onits proximity banking vocation as well as its translation into productsdesigned to foster financial outreach;(ii) the anticyclical behaviour of proximity banking through the longterm commitment with its clients;(iii) the broader contribution to the welfare of the community throughthe use of profits for community projects;(iv) the mechanisms to ensure accountability to stakeholders; and(v) the role of financial regulation and supervision.5 See EU Commission (2010).23