First came the news of banking turmoil; then the analysis; now we have the lessons learned in hindsight. This week, Directors & Boards talks about what boards can take away from the Silicon Valley Bank collapse. And Jamie Dimon shares his thoughts in his annual letter to JPMorgan shareholders. The Biden Administration also hinted that tighter regulations for mid-sized banks might be coming.
In other news, Tech giant Alibaba is splitting into sixths; Starbucks shareholders demand an examination of the company’s stance on workers’ rights; Illumina urges shareholders to push back against Carl Icahn with their votes.
In the Spotlight
The SVB Collapse: What Can Boards Change to Anticipate Crisis?
Increase governance measures and expertise in risk management, for starters.
“Board members with risk management experience are important — but a company also needs a chief risk officer. With the collapse of Silicon Valley Bank (SVB) dominating the headlines and the impacts reverberating through the banking industry, the incident has brought to the forefront several key ways in which the company’s board fell short of managing risk, ultimately precipitating the crisis at hand. Moving forward, there are important governance lessons that boards — both in the banking industry and more broadly — should take away from recent events and steps they should take to proactively manage their exposure to risk.” DIRECTORS & BOARDS
Jamie Dimon: Effects of Banking Crisis will be Felt for “Years to Come”
Says crucial risks were “hiding in plain sight” on balance sheets.
“Jamie Dimon, the chief executive of JPMorgan Chase, who recently rallied fellow bank leaders to the rescue of smaller rivals, devoted plenty of ink to the banking crisis in his annual letter to shareholders on Tuesday. ‘As I write this letter, the current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come,’ Mr. Dimon wrote in the letter, which is followed closely on Wall Street. Last month, Mr. Dimon corralled $30 billion in funds from JPMorgan and other big banks to deposit at First Republic, a midsize lender that had struggled with rapid withdrawals and a plunge in its stock price after the collapse of Silicon Valley Bank and Signature Bank spooked the market.” THE NEW YORK TIMES
The White House Calls for Tougher Rules on Midsize Banks
The Biden Administration gets into specifics, and some industry leaders push back.
“Changes could include tougher capital and liquidity requirements, as well as steps to strengthen stress tests that assess banks’ ability to weather a hypothetical severe downturn…The administration is also pressing regulators to complete unfinished rules from the 2010 Dodd-Frank financial law, specifically a provision designed to curb compensation packages that could encourage excessive risk taking…Industry officials criticized the recommendations as premature, coming before planned reviews by the Fed and other agencies. ‘It would be unfortunate if the response to bad management and delinquent supervision at SVB were additional regulation on all banks that would impose meaningful costs on the U.S. economy going forward,’ said Greg Baer, the president and chief executive of the Bank Policy Institute, which represents midsize and large banks. ‘This has a strong feeling of ready, fire, aim.’" THE WALL STREET JOURNAL
From Boardspan this Week:
Are Staggered Boards Ever Good for Shareholders?
How staggered boards may be beneficial to not only your board’s oversight efficiency but also your company's shareholders.
"In the folklore of corporate governance, is there a governance structure that is more anathema to corporate governance mavens and shareholder democracy activists than the staggered board?...Proxy advisory firms and activists oppose them, institutional investors vote against them and shareholders proposals to eliminate them are unusually successful. Staggered boards, where subsets of board members are elected in separate classes every three years—and therefore cannot be easily or quickly voted out—are often viewed as the archetypal technique to prevent hostile takeovers.” COOLEY via BOARDSPAN
