Term limits and competent directors

Thursday, 27 March 2014 00:00 - - {{hitsCtrl.values.hits}}

As usual your paper remains the best business paper to read every morning. I like to refer to an interview with the Chairman of Commercial Bank in the Daily FT of 26 March. In the interview in response to a question on term limits and dearth of directors, Dinesh Weerakkody had this to say: Q: Finally, in terms of the banking act direction 11 you will be completing your nine-year term in July. How practical is this given the shortage of competent and the need for independent bank directors? A: This is good practice and in line with some of other good governance codes applicable in many developed markets. Term limits provide a painless way for people to retire gracefully and automatically. Admittedly, this is a pragmatic argument—and the downside is that a director who is doing a fantastic job may get forced out early. My view is term limits reduce the likelihood that a few individuals dominate board decisions forever and they also help to provide periodic injections of new energy and ideas. Then on the subject of skills and competence of bank directors, the Central Bank has been investing time and money to build the required capability and the bench strength in the banking sector. However, there is no debate bank boards require people with varied skill sets, tech-savvy and people who are independent in their thinking to ensure the board has the breadth and depth of skills and experience to enable adequate oversight of the bank business now and in the future. The answer, in my view, is very objective considering the fact Weerakkody is a young Chairman and has a long way to go. What is striking is about the answer is: a) The need for directors with independent thinking b) Directors with the required skills and who understand the responsibility they owe to the depositors. Davinda