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Dismal failure of efforts at reform

Letter to the Financial Times

12 December 2013

Letter to the Financial Times

I refer to your general comments on the published findings of the Financial Services Authority on the stewardship of the Royal Bank of Scotland (Editorial, December 4) and those of your Lombard columnist (“FSA ensures lessons of RBS boardroom stay unlearnt”, December 4).

It is truly astounding that the lessons of the RBS boardroom stay both unlearnt and unstated. The major events associated with the triggering of the global financial crisis serve to show, beyond any reasonable doubt, that unitary corporate board structures in Anglo-American jurisdictions, as a matter of urgency, need overhauling.

The mixing of execution and supervision as foreseen in these structures in the case of RBS and in a number of other instances in recent times has led to a failure to rein in or otherwise challenge the power of dominant executive directors. Can it possibly, ever, be otherwise?

The evidence is blindingly clear. The efforts dating back to the Cadbury recommendations in the 1990s through to Higgs and beyond, aimed at establishing a better balance of power at board level and more effective supervision by non-executive directors, have mostly failed. Institutional investors, as ever, are impotent shareholders in driving forward reform. Without fundamental reform events such as this will continue to destroy wealth.

Richard Tudway


The Centre for International Economics

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