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