Governance Watch - Issue 28

by Dina Medland in London


Many of the revisions and proposed revisions to the UK corporate governance code have been about closer scrutiny for accountability and to raise the bar on standards of behaviour - as have moves on regulation. 

The Financial Conduct Authority (FCA), explaining the aim of its senior managers and certification regime changes in 2015, said: “The aim of the new SM&CR is to reduce harm to consumers and strengthen market integrity by making individuals more accountable for their conduct and competence. As part of this, the SM&CR aims to: encourage a culture of staff at all levels taking personal responsibility for their actions (and) make sure firms and staff clearly understand and can demonstrate where responsibility lies.” Against this backdrop, the business media headlines this week raise important issues of corporate governance.

FCAs chair-elect admits error of judgment over tax-avoidance scheme ran The Guardian headline on Tuesday. Charles Randell, the incoming chairman of the Financial Conduct Authority “has admitted to an ‘error of judgment’ after investing in a controversial tax avoidance scheme that resulted in him repaying more than £100,000 to the taxman” it said. 

A former City lawyer and government adviser at the time of the financial crisis, Mr Randell “told the Treasury select committee that he had failed to see a ‘warning signal’ about Ingenious Film Partners 2 LLP, an investment product that promised members tax reliefs but was subsequently challenged by HM Revenue & Customs.”

It’s hard to see why “error of judgment” is not in quotation marks in this headline. This is a much-awaited appointment at a time when the general public is sceptical about the will of the regulator to do as it says :“create a new accountability framework focused on senior management” and to protect the general public from any transgressions. 

At a parliamentary hearing on his appointment to lead the financial watchdog, Mr Randell said: “I take responsibility for the decision I took”, indicating that he had dispensed with the services of his financial adviser when HMRC started taking action against the scheme, according to The Guardian story.

Business media coverage has generally put “error of judgement” in the headlines. Here is Financial News, Accountancy Live, City Wire, and FT Adviser. There are no quotation marks in the use of the phrase ‘error of judgment’ in the last headline (as in The Guardian too) but there are in the story. Is it a tiny detail, a case of moving fast to get the news out? Perhaps – but business media sways opinion and headlines are more important than ever when we know the story is often not read. 

The Financial Times headline :  Incoming FCA chairman invested in film tax avoidance scheme. 

Mr Randell is due to take up his post in April. For a closer look at this, including public reactions to the story, see my blog Board Talk soon. 

Gender pay gap

It takes a strong person to take on the ‘Big Four’ accountancy firms and the ‘Magic Circle’ law firms, and their informal nicknames suggest why that should be the case. Inga Beale, the female CEO of insurance market Lloyd’s of London, is such a person. 

Equity partners at these firms are excluded from gender pay reporting because they are deemed to be ‘owners’ not ‘employees’. There are no prizes for guessing the gender of most equity partners. With the best paid male staff excluded from the data, it seems dubious whether it is just a case of more “lies, damned lies and statistics.” 

Measurement is one thing, changing culture is another. Yet strangely, not one of these firms, some of which have notably made gender equality into a marketing platform, appears to have questioned its own reporting.

Ms Beale has put this into the spotlight and called for an overhaul of the reporting requirements at such partnerships, covered by this FT story.  

Photo by Rob Bye on Unsplash

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