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

London Fintech Podcast

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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