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NUMERO 11 - 30/05/2012

 The role of the Board for italian banks: a combination of agency and resource-based theory perspective

Since the onset of the crisis, banks’ corporate governance has become an area of particular concern. On many occasions, supervisors have highlighted the importance of good bank governance, in terms of qualitative and quantitative composition of boards, sharp and consistent definition of roles and responsibilities, reliable and effective information flows, fair remuneration schemes. Good governance mechanisms are particularly important for banking and financial institutions because of the specific nature of banking activity and the dire consequences that a banking crisis may have on the economic system. Banks that adopted sound governance mechanisms are more likely to efficiently allocate capital, properly manage risks, promptly react to critical situations in financial markets, avoid or contain losses due to intense and widespread crises.  Within corporate governance factors, the boards play a crucial role in achieving the company’s goals. The board can be viewed as a service body which performs two different functions: a) reviewing and approving fundamental operating, financial, and other corporate plans and strategies (monitoring role); b) counseling management on the firm’s strategic direction (advisory role)... (segue)

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