Davis Polk Financial Institutions practice head Margaret Tahyar was quoted in Bank Director discussing the FDIC’s new proposed corporate governance guidelines.

Margaret says the proposal “sounds like a good idea” in theory but has issues in its execution. “You don’t get good corporate governance by assigning a list of tasks to directors,” she said. “By assigning a list of tasks — and there are so many lists of tasks here, they’re very detailed and then [the FDIC makes] them enforceable — it becomes a compliance exercise,” she says. “You’re turning what should be corporate governance into a low-level compliance job.”

She expressed concern that the proposal will ultimately make board service less attractive to potential directors, complicating the board talent search.

Margaret noted that the FDIC reserves the right to apply the standards to banks below $10 billion if it believes they pose a heightened safety and soundness risk. She also said directors at banks with $5 billion in assets should begin considering the impact of this proposal, given the likelihood they would be subjected to it in future years, and encouraged directors at FDIC-examined banks to read the proposal and submit a comment letter to the agency ahead of the December 11th due date.

“Proposal Blurs Line Between Boards and Management, Critics Say,” Bank Director (November 20, 2023)

Copy link to share post