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Conflict & Resolution

Conflict & Resolution. Bank Board Issues and Responsibilities Prof N Balasubramanian December 2005. Definitions. Conflict is the Opposition or Simultaneous Functioning Of Mutually Exclusive Impulses, Desires or Tendencies

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Conflict & Resolution

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  1. Conflict & Resolution Bank Board Issues and Responsibilities Prof N Balasubramanian December 2005

  2. Definitions • Conflict is the Opposition or Simultaneous Functioning Of Mutually Exclusive Impulses, Desires or Tendencies • Conflict of Interest is a Conflict between the Public Obligations and Private Interests of a Public Official • As Fiduciaries, Directors are in a Similar Situation © IIMB Centre for Corporate Governance and Citizenship

  3. Conflict of Interest • Conflict of Interest Arises • when a person able to influence a decision, either by voting strength, or his official, moral or intellectual persuasion, • is likely to gain some advantage from the decision outcome • either for himself/herself or an organisation he/she is directly involved with © IIMB Centre for Corporate Governance and Citizenship

  4. Conflict of Interest • Also when • A director’s outside duties, obligations or interests • Differ fundamentally • From his/her obligations as director of the Company © IIMB Centre for Corporate Governance and Citizenship

  5. Directorial Obligations • Duty of Care • Time and Diligence Commitment • Normal Business Acumen & Judgement • Duty of Loyalty • No Self-Dealing or Personal Gain • No Competing or Conflicting Interests • Full Transparency & Disclosure © IIMB Centre for Corporate Governance and Citizenship

  6. Categories of Conflict • Board vs Dominant Shareholders • Board vs Individual Director(s) • Board vs Executive Management • Board vs Stakeholders © IIMB Centre for Corporate Governance and Citizenship

  7. Categories of ConflictBoard vs Individual Director(s) • Related Party Transactions • Directorships in Competing Entities • Constituency Nominees • Confidentiality of Client Information © IIMB Centre for Corporate Governance and Citizenship

  8. Categories of ConflictBoard vs Dominant Shareholders • Parent vs Bank • Business Strategy Related • Minority Shareholders Related • Mergers, De-mergers • Negatively Impacting Other Shareholders • Preferential Share Allotments • Non-Participation in Equity Buy-Back © IIMB Centre for Corporate Governance and Citizenship

  9. Categories of ConflictBoard vs Executive Management • Poor Information Flow to Board • Information Overload • Inadequate/ Inefficient Time Allocation • Not “Listening” to Independent Voices • Compliance in Form, Not in Substance • Persistent Ratification Requests to Board of Executive Decisions Beyond Authority © IIMB Centre for Corporate Governance and Citizenship

  10. Categories of ConflictBoard vs Customers • Confidentiality/ Abuse of Information • Bank Role as Advisor & Implementer (Portfolio Management/ Own Mutual Funds) • Bank Role as Agent & Principal (Portfolio Advice/ Trading on Own Account) © IIMB Centre for Corporate Governance and Citizenship

  11. Resolution Processes • Full Disclosure • Non-Participation in Discussion/ Decision • Arms Length Evaluations/ Independent Validations • Executive Sessions of Independent Directors • Non-Recognition of Votes of Parties Positively Impacted © IIMB Centre for Corporate Governance and Citizenship

  12. Independence of Directors • Essential to Bring about Objectivity & Ensure Interests of ALL Shareholders are Equitably Protected • Independence Is a State of the Mind & Strength of Character • Best Practice Guidelines on Independence © IIMB Centre for Corporate Governance and Citizenship

  13. Conflict Resolution ProcessesSome Thoughts • Enablers for Independent Directors to be Effective • Certain Subjects to be Decided only at Meetings of Board, Not by Circulation • Quorum Requirements to Ensure Participation by Majority of Independent Directors • Certain Subjects to Require Approval by Majority of Independent Directors Participating © IIMB Centre for Corporate Governance and Citizenship

  14. Ethics & Conflicts of Interest • Ethical Behaviour Key to Conflict Resolution & Pre-emption • Equity, Transparency & Fair Play, Key Ingredients • Trust & Fiduciary Obligations, Key Drivers • Corporate Reputation – Indispensable Contributory to Corporate Success © IIMB Centre for Corporate Governance and Citizenship

  15. Conflict & Resolution Thank you for Your Time & Attention © IIMB Centre for Corporate Governance and Citizenship

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