Bank Governance and Systemic Stability: The “Golden Share” Approach

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Posted by Saule T. Omarova, Cornell University, on Friday, May 26, 2017

Editor’s Note: Saule T. Omarova is a Professor at Cornell Law School. This post is based on her recent article, forthcoming in the Alabama Law Review.

The global financial crisis of 2008 has underscored the urgent need for deep rethinking of how financial firms ought to manage risk, and do so not only for the sake of generating good results for themselves and their clients but also for the sake of keeping the entire financial and economic system from collapse. Conceptually, this collective post-crisis “rethinking” effort seems to proceed along two basic lines. Some scholars and policy experts focus on enhanced public regulation and supervision of financial firms and markets—through higher capital standards, mandatory stress testing, greater and faster data collection, etc.—as the key method of minimizing systemic risk. Others, by contrast, see improved private ordering—through strengthening various mechanisms of corporate governance, incentivizing individual firms and their employees to behave ethically, etc.—as the ultimate solution to the same problem.

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May 26, 2017 at 06:47PM

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