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Running the World's MarketsThe Governance of Financial Infrastructure$
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Ruben Lee

Print publication date: 2011

Print ISBN-13: 9780691133539

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691133539.001.0001

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What Is the Most Efficient Governance Structure?

What Is the Most Efficient Governance Structure?

(p.247) Chapter Eight What Is the Most Efficient Governance Structure?
Running the World's Markets

Ruben Lee

Princeton University Press

This chapter analyzes what is the optimal governance model for market infrastructure institutions using the broad goal of efficiency as the main yardstick to compare different models. Three fundamental elements of governance are examined: an organization's ownership structure, its profit mandate, and its board composition. The chapter is composed of four sections. The first section outlines the archetypal ownership and mandate models that may be adopted by a market infrastructure institution. The second section identifies and discusses the pivotal factors that affect the relative efficiency of the different ownership and mandate models. The third section discusses two issues of fundamental importance to market infrastructure institutions' boards: the roles such boards should undertake, and the merits and difficulties of having independent directors or user directors on these boards. The last section encapsulates these discussions and presents key lessons about how to choose the optimal ownership structure and mandate for a market infrastructure institution.

Keywords:   governance model, market infrastructure institutions, ownership structure, board composition, profit mandate

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