Non-executive directors criticised by activist shareholders

15 September 2008

Bank boardrooms were insufficiently warned of the credit crunch, thanks to the presence of non-executive directors.

This is the claim of a new report from Knight Vinke, an activist shareholders' group.

According to the new analysis, these "non-execs" should now be obliged by banks to employ financial advisors, in order to leave them better positioned to steer the financial firms through tough times.

The comments were made as Lehman Brothers looks to be the second major US investment bank this year, along with Bear Stearns, to be taken over due to its credit crunch-induced liquidity concerns.

Glen Suarez, a Knight Vinke director, said: "At a bank, you need very high standards of corporate governance and the independence, competence and effectiveness of non-executives matters a great deal.

"They should be putting fire under the feet of management… [but instead] part-time non-execs sometimes don't give adequate time to their boardroom responsibilities as they often have other duties."

Banks have been hit with over $400 billion of asset write-downs and credit losses since the beginning of the credit crunch last summer.

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