How should our financial institutions be governed? This summer the European Commission issued a Green Book asking for opinions on how to deal with the massive failure of corporate governance in banks and insurance companies. Is this an opportunity to move away from a “shareholder dominated” towards a “stakeholder” company?

This summer the European Commission issued a Green Book to solicited opinions on how the issue of corporate governance and remuneration policies in financial institutions should be dealt with. The severity of the financial crisis shows that there has been a massive failure in corporate governance in financial institutions, which not only failed to prevent but also created incentives for risky behaviour in order to make short-term profits. The role of remuneration policies, particularly through the use of stock options and short-term bonus payments which creates incentives for managers to increase share price in the short run, has received special attention. The public has found the level of pay at many financial institutions unacceptable, particularly at the banks receiving large public subsidies to stay afloat.

The Green Book asked for responses on detailed questions on dealing with the following problems in financial institutions:

• Conflict of interest
• Implementation of corporate governance principles
• Organisation of boards of directors
• Risk management
• The role of shareholders in governance
• The role of supervisory authorities
• The role of auditors

The replies to the consultation, which were due by 1 September 2010, have not yet been released to the public. When they are made available, they will serve as a barometer providing some indications of the extent to which the opinions of interest groups and experts have turned against the dominant shareholder model or merely seen the need for patching up the existing framework. For its part, the GoodCorp network of experts and trade unionists concerned with corporate governance issues issued an opinion calling for a fundamental rethinking of the shareholder value paradigm. A strengthening of worker participation and state regulation and a fundamentally new approach to executive remuneration are a few of the demands made by GoodCorp. A number of trade unions and trade union confederation, including the ETUC and Germany’s DGB, also submitted their opinions to the European Commission in response to the Green Book calling for a greater role for workers in financial institutions.

The results of this consultation are likely to be important for a broader consultation on corporate governance in all companies planned for the beginning of 2011. It will be important to take this opportunity to demand a stronger voice for labour in all companies.