The Corporate Governance of Banks

17 Pages Posted: 7 Sep 2005  

Jonathan R. Macey

Yale Law School

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management

Abstract

The study argues that commercial banks pose unique corporate governance problems for managers and regulators, as well as for claimants on the banks' cash flows, such as investors and depositors. The authors support the general principle that fiduciary duties should be owed exclusively to shareholders. However, in the special case of banks, they contend that the scope of the fiduciary duties and obligations of officers and directors should be broadened to include creditors. In particular, the authors call on bank directors to take solvency risk explicitly and systematically into account when making decisions or else face personal liability for failure to do so.

Keywords: corporate governance, commercial banks, fiduciary duties

JEL Classification: G2, G3, L2, L5

Suggested Citation

Macey, Jonathan R. and O'Hara, Maureen, The Corporate Governance of Banks. Economic Policy Review, Vol. 9, No. 1, April 2003. Available at SSRN: https://ssrn.com/abstract=795548

Jonathan R. Macey (Contact Author)

Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
+203-432-7913 (Phone)
+203-4871 (Fax)

Maureen O'Hara

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3645 (Phone)
607-255-5993 (Fax)

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