An FSB board member can better align corporate governance with SIFI sustainability

Abstract

•The recommendation herein bifurcates regulation, amends shareholder theory and its consequent legal expression by putting a Financial Stability Board Stakeholder on every Systematically Important Financial Institution Board, and the Board of its holding company if applicable.•A FSB Stakeholder would take on the CRO role from the Board perspective with the entire financial system in mind rather than only assessing long-term risk for that particular SIFI.•At present, SIFI organizational theory and application allows diffuse shareholders the rewards of a diversified portfolio of SIFI assets, while exerting no potent corporate governance through what are commoditized voting rights.•The highly contextual nature of a fiduciary duty makes prediction of executive management extremely difficult and requires a more rigorous judicial function best executed by a FSB Stakeholder with Board vantage.•Financial stability is not forecasting, masterminding the future, an attempt to eliminate risk or even an attempt to minimize risk, but rather guarantees the core SIFI activities are capable of sustained functioning able to over-ride any action or pursuit that systematically or unreasonably threatens the public good of international banking.