However, if not balanced appropriately, this can also lead to complacency and “groupthink”, and as a result, the institution would remain stagnant and uncompetitive. Identifying and searching for new directors who are up to the task of governing complex financial institutions is not easy and takes time. It is due to these factors that the board needs to adopt a proactive and rigorous approach in the matter of board renewal and succession. Balance also needs to be achieved in the incentive structures for financial institutions’ board of directors. We are all aware that recent legal and regulatory developments in corporate governance have significantly raised the responsibilities and potential liabilities of board members. In order to attract and retain the right talent, it is essential to develop an appropriate remuneration package that is commensurate with the heavier and expanded responsibilities of directors. Similarly, financial institutions engaging in Islamic finance should also include a review on the remuneration of their Shariah committee members with the aim to attract and retain the best talents. But having an attractive remuneration package as described above is not enough. Having a dedicated budget for the development and training of directors will also be crucial in helping them to acquire new knowledge and skills that enable board members to effectively discharge their duties and responsibilities. In a complex and fast changing environment, individual directors need to remain apprised of emerging trends within the industry and economy. Experiences accumulated over the years will no doubt help directors in discharging their roles and responsibilities.

But an equilibrium can be realised through careful design, taking into consideration an institution’s internal structures and behavioural norms. Needless to say, the accepted behaviour and values promoted and demonstrated by the senior leadership will influence the business culture and values throughout the organisation. Talking about cultures and values, we should also be mindful about the need to educate and instil into the new generation of bankers the importance of integrity, ethics and professionalism. For this reason, industry training institutes like the recently established Asian Institute of Chartered Bankers play a vital role in cultivating higher standards of governance, ethics and professionalism in the financial sector. The importance of the contributions by these institutions cannot be underestimated. After all, graduates starting off their careers in the financial sector will be the leaders and captains of the industry in years to come. Good governance ultimately depends on the existence of strong and competent boards and a pool of professional senior management. To remain effective, boards are often confronted with the challenge of achieving an optimal balance between the need for continuity and the need for fresh perspective. This brings into question the issue of board composition and membership, and how talent on boards should be continuously renewed. Because financial institutions are complex creatures, longer-serving individual directors can bring a depth of knowledge and experience into the business of the financial institutions, which would consequently strengthen the ability of the board to provide effective oversight. Such continuity also encourages a cohesive board.