Reduce the influence shareholders have on banks by 50% and instead appoint a council that keeps watch over the public interest.

This way, not only individual interests but also the greater common good is taken into consideration when a bank sets out a course for the future, say Prof. Michiel Scheltema and Arjan Scheltema.

Michiel Scheltema is former chairman of the Dutch ‘Wetenschappelijke Raad voor het Regeringsbeleid’ (Scientific Council for Government Policy) and together with his son Arjan Scheltema he wrote an advisory report for the ‘Vereniging voor Effectenrecht’ (Association for Securities Law) in which they plead the above measures.

Little passion
These measures are necessary, they say, because it is highly unlikely that shareholders can truly put aside their own interests when they get the power to control the board and general policy of a large bank.

According to Michiel and Arjan Scheltema, the primary supervision on a bank’s risk management should come from within the organization, rather than from outside supervisors like the AFM (‘Autoriteit Financiele Markten’ – The Netherlands Authority for the Financial Markets). They say that little passion and creativity can be expected from supervisors who prefer to keep details on potential risks undisclosed.

Special council
Michiel and Arjon Scheltema plead for a special council to be formed to test the public interest of financial institutions. Rewards or discharge of members of the board should be weighed with both the interests of the shareholders and the interests of the greater public in mind. Customer satisfaction can become a factor in this process.

Do you agree that shareholders take too little heed of the general welfare of consumers? And, if so, do you agree that taking away part of the control shareholders have over an organization and putting it in the hands of a specialized board is a good solution? We want to hear your views.