Banking StandardsWritten evidence from Sir David Walker

Thank you for your letter dated 17 October 2012 requesting supplementary evidence on two points further to my hearing with the Commission on 12 September. My responses to the two specific questions you pose are as follows:

1. I still believe that a time commitment of 30–36 days per annum for non-executive directors to be broadly right. This assumes a non-executive director is a member of at least one committee whilst the time commitment for the chairs of board committees such as Risk, Audit and Remuneration would be significantly higher. However, it is important that Board members are prepared to devote such time as is necessary to ensure they carry out their duties effectively. For example, Barclays directors devoted significant additional time over the summer in response to the situation facing the bank, frequently at relatively short notice. It is also important that serving chief executives are not effectively prevented from serving as non-executive directors on bank boards and I would not expect such individuals to commit to a time commitment of 30–36 days. However, the minimum time commitment for such individuals in my view would be 20 days and I would expect the average time commitment of the non-executive directors as a whole to be in the 30–36 day range.

2. In my short response to the Commission, I explained that “… the principal accountability of the board is to the shareholder; but the shareholder’s interest is in sustainable performance, which will not be achieved if it is a quick buck and is inattentive to reputation.” To expand on that point, any board, in setting the risk appetite for an organisation, should have in mind the obligations that must be adhered to under its fiduciary and statutory obligations. However, a board must also have in mind the social externalities of the environment in which that business operates, particularly societal and economic. A board must ensure the right return for shareholders, but that cannot be set in a vacuum. That applies even more so to banks, which are, perhaps, different to other companies in that they must be particularly attentive to the wider social externalities I have touched on. It is, however, important that banks can earn returns on equity above the cost of equity if they are to be viable private sector enterprises.

24 October 2012