Kenneth Spong and Richard J. Sullivan The bank corporate governance process is a complex framework. This governance framework encompasses a bank’s stockholders, its managers and other employees, and the board of directors. Banks further operate under a unique system of public oversight in the form of bank supervisors and a comprehensive body of banking laws and regulations. The interaction between all of these elements determines how well the performance of a bank will satisfy the desires of its stockholders, while also complying with public objectives. For investors and regulators, this bank corporate governance framework is thus of critical importance in a bank’s success and its daily operations. While governance by bank stockholders and directors has always been viewed as important, this topic has drawn increased attention in recent years. Among the reasons for this interest are banking deregulation and a rising role for market discipline and governance; substantial banking consolidation and resulting changes in the management, board, and ownership structure of many banking organizations; and a movement in many countries from state-owned banking systems to greater private ownership and control. Another factor is recent corporate scandals, such as Enron, Tyco and WorldCom, and the ensuing passage of the Sarbanes-Oxley Act of 2002, with its provisions aimed at improving corporate disclosures, increasing managerial responsibility and involvement, and tightening board oversight. However, in spite of all this recent attention and the many pronouncements that have been made by so-called corporate governance experts, a range of opinions exists on what would constitute a...
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