Jouyet on governing corporations and financial services – more work needed

Who should govern, or at least, who should set the framework for governance? This question was on the mind of Jean-Pierre Jouyet, chairman of the French securities regulator AMF, as he discussed the failure of governance in the financial services sector that led to the crisis that threatens, again, the stability of banks and insurers. Jouyet told the International Corporate Governance Network that there were corporate governance failures, when bank boards failed to act. There were also failures in the governance of financial regulation. Regulators failed to share information, detect emerging risks and prevent regulatory arbitrage, despite the existence of a variety of coordinating entities. Moreover, there were governance failures among investors, who missed the risks inherent in some of the structured financial products they bought. Since the financial crisis, many measures have been introduced, of course. But Jouyet's not sure they address the core problem. So who should be in charge?

Stakeholders of all types "must participate in the elaboration of governance frameworks", he said. Governance must work for the "company as a whole", so, "the company's governance cannot be determined by the sole [sic] executive directors, shareholders, employees or customers, but must be determined jointly by all these different categories." In particular, shareholders had to do their homework, which was why the AMF recently issued guidance that any shareholder using the services of a proxy voting agency ought to make their own assessments and not just follow the proxy service's recommendations. American and Asian registry firms need to communicate better with European ones to facilitate cross-border voting.

A global framework? Jouyet also raised the question of whether the world ought to be moving towards a single framework for corporate governance. It was a question he wasn't ready to answer, however. Instead, he suggested that the ICGN ought to work out what's the best balance between global convergence and local translation of principles.

Source document: The Jouyet speech to the ICGN is an 11-page pdf file, in English.