April 04, 2024

LFP248 – The Challenges of FS/Fintech Boards esp in the 21stC w/Neil Holden Serial FS NED

54 minutes

The Governance of FS as a whole affects all of our lives as we saw in 2008 let alone in many individual examples of FS/Fintech businesses failing and losing clients money. In our digital age virtually all of our money is digital and next to no-one sees a share certificate any more so all of our investments are digital. Thus what might appear to be a refined topic for a few is at the heart of all of our lives – money being used for roughly everything and savings equating to money saved for tomorrow.

As a result of this central role of money in economies, Boards in FS have always had to be – lets put this mildly – “rather more careful” than Boards of companies which if they fell over would “domino” not very far. Not only do many FS/Fintechs “take care of” clients money but money itself in the current financial model is created out of thin air by banks.

Add to these long standing issues the ever-increasing burden on Boards as a whole from the always metastasising Regulatory State, ever-greater minutiae in FS per se and the State using companies to enforce social agendas which even a decade ago would have seemed unlikely/bizarre and we have a very challenging cocktail.

Neil has 20 years expe4rience on Boards and Chairing sub-committees of FS and Fintech Boards and is thus well-placed to guide us through this labyrinth.

Topics discussed include:

Scottish and Irish traditional folk music

transitioning from classical piano to the accordion

interesting anomalies re accordions – not least of which one has to fill in the bass part oneself

musical insights into Scottish vs Irish music

learning music as “play these notes” vs “play along with us”

a lot of folk musicians cannot read music

Neil’s career journey

the long delay between Basel II and Boards getting with it

the felt sense of FS Boards vs “normal” companies – cf FS and Sainsburys

looking after other peoples money – fiduciary duty

even if you are the equivalent of a corner shop in FS/Fintech you have to have as much governance as the equivalent of Sainsburys – which in retail obviously does not apply

the need to cope with all that overhead when your Fintech is still very small

Case Study of innovation/Fintech/regulation

Banking Alchemy – a broken model of money (see eg LFP085, LFP197, LFP220 and LFP231) leads to a broken banking system which cannot be repaired by any governance as have discussed in many episodes

a deep dive into unitary Boards vs sub-Committees of Boards

what has driven this

the strange situation re independent directors and sub committees where excess do most of the talking yet are technically no on the committee – “it is slightly absurd”

the volume of “left-brain” stuff heaped upon FS/Fintech Boards absolutely swamps the Board meeting crowding out creativity in governance and business strategy

a comparison of FS vs Airline regulation

literally no limit to the amount of over-regulation of FS

ever-increasing costs to the consumer as a result and higher risk taking as more people in FS/Fintech are doing non-revenue related activities

management by walking around starts failing in the larger organisation where one is more dependent on management perception/spin

comparison with quantum world – what is observed by the Board changes as a result of being observed

the need to get a feel beyond the management information

what are the powers of a NED individually or in a committee

the challenge of balancing the need to gain insight and challenge yet not annoy/rile the executives

the pressure on the Chairman in these circs

“poking your nose in but not poking your fingers in” as summing up the role of the NED

21stC challenges from the whole tsunami of Corporate Governance (and the word literally did not exist from Chaucer up to the 1970s) and “ESG” et al

the problem of a “free market” solution to governance and the problem of “bureaucratic rules” solution to governance

NSDAP (“the Nazis”) as the inventors of Corporate Governance in 1930s Germany again – cf now? – to impose their political agendas upon companies

the abuse of Governance

Boards and “guidance” re ESG/DIE etc – the huge pressure to conform to something which is not statutory

the imposition of groupthink by regulators yet regulators say groupthink is the biggest risk for Boards…

the idea of safetyism and “nothing should ever go wrong”

“there is no real difference ultimately between corporate control and corporate creativity” [as the longer term risk is the world is changing and the company does not react appropriately]

the “war on meritocracy”

the major risk of FS/Fintech Boards is groupthink and agreement re the wisdom of the rules/codes/guidance etc which is imposed upon Companies from outside the Boardroom

Advisory Boards, Strategy days that are not minuted as important in these circs to have “unruled” conversations

“Board Champions” as the latest pressure from regulators which break down the whole idea of collective responsibility and power of sub-committees

Neil’s overall advice to FS/Fintech Board members especially younger folk embarking upon their first gigs

the importance of human dynamics within the Board – key cruxes

is it a good trade being an FS/Fintech Director?

non-commercial rewards in the role

Neil’s shoutouts for both folk music-ing and his own NED role portfolio state right now

the Mutual Model of FS as an appealing one

And much much more

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By Tony Clark

4.6

88 ratings