AS THE first stage in a reform process promised in the programme for government, the Department of Finance has invited members of the public with relevant professional knowledge and experience to apply for vacancies on the boards of the guaranteed banks that will occur shortly. The move marks an attempt to raise standards of corporate governance.
At Bank of Ireland for instance, no fewer than nine of the 14 board members in place since before the 2008 financial crisis will resign shortly. The Government’s stated objective is to help restore public confidence in the banks where board appointments would also be subject to scrutiny by the Central Bank.
This major clear-out of bank boards is one in a series of changes that will also include how the Government appoints members to State boards. Governance failures in the banks greatly exacerbated the financial crisis. Likewise, failures in State agencies (notably the Dublin Docklands Authority) have added to the taxpayers’ heavy burden. The Government also favours a similarly open approach in filling vacancies on State boards with the public being offered the opportunity to apply for vacancies as they arise.
As before, the Minister would nominate the chairperson of a State body who would then be publicly questioned by the relevant Oireachtas committee. However, the committee cannot veto the appointment. Such scrutiny of candidates by Oireachtas members will increase transparency. This process may deter some well-qualified people from applying. But it will make it more difficult for ministers to exploit State boards and agencies for the purposes of political patronage, where the political affiliation of those appointed has mattered more than their suitability or professional qualification for a board position.
These reforms are welcome and long overdue. But only time will tell if they go far enough. Ministers will continue to select board members – albeit from a larger pool – including the chairperson. A recent survey by the Institute of Directors in Ireland of its members (including those who sit on State boards) found that four-fifths were in favour of more far-reaching changes. Their preference was selection – via a State Boards Appointments Committee – that was independent of the political system. Given our sorry history of corporate governance and the extraordinarily negative consequences that have flowed from it, this approach has much to recommend it.