High Performance Boards

CHAPTER 18The Intricacies of Subsidiary/Holding Governance

Larger organisations in particular may have tens or even hundreds of wholly- or partly-owned subsidiaries, which raises the question of how to govern them. Simply put, should they be governed at subsidiary level or at group level? And how does the role of the director change as a result? Interestingly, these questions arise in 100%-owned subsidiaries, as well as in those where the group has a majority stake or even a large minority holding. This chapter reflects on the diversity of best practices from different environments in the hope of inspiring further governance evolution in this area.

The issue of subsidiary/holding governance is becoming even more important for three reasons:

• the rise of national interests;
• increasingly engaged financial actors;
• the dynamics of business transformation.

As countries around the world increasingly seek to assert their national interests, their regulators and governments are asking for governance decisions to take place in their country and not at international headquarters. They have thus started imposing decision powers at national governance level, including in banks and insurance companies. National interests must now be protected in many areas, such as financial stability, health, and food safety. Regulators are asking for national subsidiaries to have effective boards, not just boards on paper.

As a result, subsidiaries of international groups must often go beyond complying ...