Thanks, Marxia, for the information. However, if it's up to you in such a situation, what mechanism or combination of mechanisms would you select?

Anglo American model has one tier boad or unitary board where board is the highest authority. In case of German-Japanese model have two tier board. They have an additional baod called supervisory board. The supervisory board monitor the board activities. Besides, no of independent directors, qualification and experiences, attitudes of directors, female directors, motivation of management and board of directors, and the like are also be considered to ensure good governance. 

In addition to the board function, how about the other internal governance mechanisms such as internal control and audit function. Can they be useful for monitoring performances?

In the Mexican experience, using an Audit Committee has proved to be a solid element of Corporate governance in Financial Institutions. The existence of such Committee as well as others (Risk management committee for instance) is compulsory.

in my opinion the main mechanisms of corporate governance are: 

1- Board size affect

2- the CEO duality affect

3- CEO tenure affect

4- the large shareholders ownership affect

5- the percentage of independent directors effect

All above are useful for monitoring performances of the corporations.

Hello,

Work and debates conducted by the European Commission in the past 5 years on this very particular topic might be of interest for your research, especially as the EC has embraced an holistic perspective of corporate governance (i.e. focusing not only on boards, but also on mechanisms linked to executive remuneration, shareholders' involvement, financial and non-financial reporting, and so on).

The main sources of information I would recommend to consult are:

• the EC webpages dedicated to EC initiatives in the field of CG in financial institutions (here http://ec.europa.eu/internal_market/company/modern/corporate_governance_in_financial_institutions_en.htm)
• The Green Paper issued in 2010 on CG in financial institutions (here http://ec.europa.eu/internal_market/company/docs/modern/com2010_284_en.pdf), with accompanying working document summarising good/best practices (here http://ec.europa.eu/internal_market/company/docs/modern/sec2010_669_en.pdf)
• The EC opened a public consultation on the Green Paper, thanks to which it collected opinions from various stakeholders. You can find the latter here: https://circabc.europa.eu/faces/jsp/extension/wai/navigation/container.jsp. The official summary of responses is to be found here: http://ec.europa.eu/internal_market/consultations/docs/2010/governance/feedback_statement_en.pdf.

Best regards,

Aline

Thanks everybody for the opinions and sources.

Dear Ahmed,

I think that proper internal control is crucial for financial insitutions. Most of the banking desasters of the last decades were caused by management override or a single branch or department failing to follow internal procedures. There are countless  examples: the Barrings Bank, Societe General, the LIBOR scandal, the new scandal of the German Deutsche Bank in Russia, to mention just the view.

Paul

Hi Paul.

I agree about the importance of internal control as a corporate governance mechanism in financial institutions. Now how about the institution's audit committee and/or its internal audit in this regard.

Dear Ahmed,

The main task of the audit committee is to act as a liason between the company and its internal / external auditors. The above examples about transgression in banks show that external auditors failed in discovering and addressing managemenet override and bypass of controls. Hence, if external auditors fail, there is nothing to discuss with the audit committee. In my view the internal auditors remain the only force capable of discovering and addressing the problems. Their focus, their modus operandi and  their knowledge of the company are significantly different from those of the external auditors. However, as is often the case if employees are involved, their independence from managament and carrier advancement is crucial.

Paul

Hi,

You may be interested by this paper:

Board monitoring of the chief financial officer: A review and research agenda

Corporate Governance: An international Review, March 2017, (pages 116–133) David Alexander Uhde, Patricia Klarner and Anja Tuschke

Best regards

Thanks a lot, Patrick.