Corporate Governance for Banks in Southeast Europe: Policy - IFC

V. Promoting an environment that supports sound governance 81Getting Beyond the Governance Infrastructure“We have come a long way in the last 15 to 20years. We understand well the infrastructureof governance; we know how boards shouldbe constituted; we know what committees weshould have; we know what qualificationsare necessary for the chair of the board. Weneed to get beyond the infrastructure andunderstand how we can make functioningin the boardroom more effective.”Peter Dey, Canada“The problem with corporate governance, andalso in crisis, is a behavioral issue. At theend of the day, therefore, we have to havegood managers, good CEOs, good boardmembers, in order to have good banks.”Bistra Boeva, BulgariaThe corporate governance of banks is determined bythe legal framework and a sound interaction betweenshareholders, boards, managers, supervisors, and otherstakeholders such as depositors. It represents a systemin which a variety of players contribute jointly to itseffectiveness. In countries with strong governancepractices, there is good interaction between all of thesecomponents.In SEE, some of these factors may require enhancementor may be missing altogether as countries seek todevelop their economies. Certainly, excessive attentionto rules, codes, and standards risks addressing onlyhalf of the corporate governance equation and turnsgovernance into a compliance exercise in which banksengage to keep regulators at bay. Ultimately, goodcorporate governance has to do with establishing theproper governance environment that encourages theright behaviors.Recommendation:Incentives and behavioral issues: Companies and regulators are encouraged to look at behaviors andculture ahead of structure and processes. Boxes and checklists may have value but they are insufficient. Moreattention needs to be paid to the variety of stakeholders in the governance process and the incentives thatcontribute to good governance. A multipronged, long-term approach involving a wider range of players inthe governance equation may serve to create the desired cultural change. To start, a more active dialogue isneeded between banks and supervisors.81 2010 BIS Principles, Section V on promoting an environment supportive of corporate governance, p. 33.56Policy BriefCorporate Governance for Banks in Southeast Europe