All major strategic and operational decisions of highly successful financial institutions across the world are executed by their management upon proper vetting, review, and due diligence by the board of directors. An intensive review revealed the board of such thriving banks comprises mostly independent non-executive directors, whose primary objectives align with the best interests of the bank, its health, and achievements as opposed to self-interest or ulterior motivations.

It is a matter of fact that most Bangladeshi private commercial banks (PCBs) are not independently or autonomously run. Only a few of the PCBs are somewhat autonomously run by their management with guidance and support from their board, and it is no surprise that those few banks are stronger and more reputed.

The reality is that most PCBs are "board-run" entities on a day-to-day basis as opposed to being institutions with a balanced combination of both "management plus board". The required balance between management and the board in terms of their functions is not there because for the most part, the board is the significantly more dominant party.

This may have been somewhat acceptable if a majority or at least some of the board members were truly independent but that is not the case. The board is mostly composed of people who usually hold a direct ownership interest in the bank or related parties, as well as those who are close friends and relatives of the owners and other influential board members. This contaminated structure inevitably leads to the board members' self-interest becoming a governing criterion in terms of formulating the institution's overall strategy and direction.

When a PCB is subject to regular undue influence and interference from its board and the board itself is not composed of truly independent directors, the bank is not likely to succeed since its primary governance framework is flawed and conflicted.

Since it is unlikely that the dominant influence of the board over the operations and strategies of most PCBs will go away anytime soon, it is necessary to evaluate how the board of these PCBs can be improved and strengthened to pave the way for better overall governance.

Including non-executive and non-owner/non-related party independent directors on the board has been one of the most important and fruitful developments in the history of banking governance. Such directors do not have any kind of significant or related relationship with the institution, therefore their primary motive and incentive are to act in the best interest of the institution.

In addition to having valuable external contacts and connections, independent directors bring the strength of diversity into the mix due to their knowledge and expertise in other industries, markets and extended networks. Since such directors are not affiliated with the institution, there is nothing stopping them from asking bold questions and challenging the management without any fear or inherent biases.

The greatest value that independent directors bring is their pure and unadulterated objectivity, the sole purpose of which is the benefit and betterment of the bank whereby self-interest is not a factor.

Apart from PCBs or even state-owned banks, all of our large private business houses also should restructure their boards and bring in more independent directors along with the next generation.

At the same time, regulatory agencies should immediately investigate the remuneration matrix of these independent directors in Bangladesh and align them with similar markets or countries. This is the only way to attract more subject matter experts and professionals to the boards and make them future-ready. There is a saying: "If you pay peanuts, you get monkeys only."

The author is an economic analyst