Accountancy Age has reported that the Financial Reporting Council has announced the members of its new board. As it notes:
The board will be led by current chairman, Sir Christopher Hogg and CE Paul Boyle. Baroness Sarah Hogg will serve as deputy chair. According to the FRC, the new board will be enlarged to sixteen members by the addition of the chairs of the FRC's Operating Bodies in the coming months.
But more important are the non-exec members, who are:
Eric Anstee: until end 2006, chief executive of the Institute of Chartered Accountants in England and Wales. Has been CFO of three FTSE 100 companies and is currently a non-executive director of Insight Investments.
Peter Chambers: chief executive officer, Legal & General Investment Management.
Rudy Markham: chief financial officer, Unilever, and a non-executive director of Standard Chartered and Legal & General.
Sir Michael Rake: chairman of BT and the UK Commission for Employment and Skills. Immediate past chairman of KPMG International.
Sir Steve Robson: until 2001 second permanent Secretary at HM Treasury. Currently a non-executive director of Xstrata, Royal Bank of Scotland, JP Morgan Cazenove and Partnerships UK.
Sir John Sunderland: chairman, Cadbury Schweppes, and a non-executive director of Barclays. Immediate past President of the CBI.
Lindsay Tomlinson: vice-Chairman, Barclays Global Investors. Past Chairman of the Investment Management Association and of the Professional Affairs Board of the Institute of Actuaries.
Very politely, this is a joke. The FRC says of itself on its web site:
The UK's independent regulator responsible for promoting confidence in corporate reporting and governance.
It's powers are quasi legal: accounting standards do, after all, have the force of law.
In which case wouldn't you have expected someone who was not an accounts producer amongst the non-execs? Maybe a user, such as a pension fund representative, or a member of civil society, or perhaps an academic or two? But not a hint is found of any such attempt at objectivity.
The old boys and girls club rules. And credibility departed through the first available exit as a consequence.
I will not be the only one who has no confidence that this team has no chance of promoting confidence in corporate reporting and governance. Could they really have imagined otherwise?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Chambers and Tomlinson sure do look like users to me.
I do not agree.
A CEO at L & G has #1 duty to L & G.
Likewise the vice-chair of a Barclay’s company.
I want people without conflict of interest. Is that too much to ask?
Richard,
I’m missing something here clearly. Mike Rake surely is the only one here who has previous or present links to, if you like, a financial reporting service provider. If you disregard the non-exec company directors, the others, such as Markham and Chambers, are users of these services, unless they have an interest that hasn’t been disclosed. Sure, the council could do with a few more disinterested members.
Ralph
If you feel this strongly about it, perhaps you should have responded to the initial consultation on the process for changing their governance structure, as announced in March.
http://www.frc.org.uk/press/pub1286.html
The list of people who did respond (http://www.frc.org.uk/documents/pagemanager/frc/Annex%20A%20to%20PN%20180.pdf) suggests that you didn’t.
Anyway, the FRC is better served by people who know their subject matter than unconnected people who don’t.
Ralph
Of the 7 five are board members of FTSE companies that issue the regulated reports and the other 2 are secior directors of FTSE 100 companies.
All are therfore financial report producers in the area where the FRC is likely to face biggest challenge – the quoted sector. After all, financial reports are the responsibility of the directors. Non-execs carry exactly the same responsibility in this regard as all members of the Board.
None are as such independent or objective.
My point is simple: if the FRC was a credible regulator it would not ahve amde this elementary error. It has. My conclusion follows from that.
Richard
Andrew
You’re right.
I was fighting them on IFRS 8 at the time.
Their conduct on that issue was, in my opinion, profoundly unethical. It provided me with few grounds for optimism, or belief that I would be heard.
Richard
In your initial comments you say that you would like to have seen a user, such as a pension fund representative, on the FRC.
Well L&G Investment Management and Barclays Global Investors are the two largest managers of pension fund money in the UK. So the pension fund community is represented, by the two leading institutions to whom they outsource their management.
Mark
I’m always bemused by the idea that those who work in the City as hired agents of pension funds are ‘invetsors’ when they are very often working for the smae people who are the vendors of pension and other financial products.
They are not the investors. Their loyalty is to their employer. That is where their reward comes from.
Investors are those who actually own the money, or at the very least the independent trustees who run these funds for them – but not their hired agents.
What is needed is a person of proven ability and independent mind to speak on behalf of these people. Like Prof prem Sikka, for example. He has no conflicts of interest.
Richard
Richard
If you are going to be wholly reductive about the interests and behaviour of individuals employed by City firms then you should apply the same logic to academics, who are also salaried employees of large institutions to whom, presumably they owe some loyalty.
The idea that academics have no conflicts of interest strikes me as wholly implausible.
Mark
Mark
You’re right
Many academics are conflicted
I suggested one who has shown himself not to be
There are also many accountants working for charities who would not be conflicted either
Richard
Richard
So let me get this right. In your opinino:
1) All employees of for-profit companies have conflicts of interests because their principal loyalty is to their employer.
2) Many academics have conflicts of interest, but not all; some have managed to avoid this problem. Presumably they are either only semi-loyal or their employer has no interests.
3) Many accountants who work for not-for-profit companies do not have conflicts of intererst. Either they have no loyalties at all, or their employers have no interests at all.
Not a very plausible or consistent account of individual or institutional interests, I’m afraid.
Regards
Mark
Mark
Very politely, your argument is absurd. I suspect you know it.
I do not for one minute suggest that any person is entirely objective – I do not believe that possible. But it is a well established fact that as far as is possible those undertaking a regulatory or supervisory role should both be as objective as it is possible to be, and as importantly, be seen to be so.
This is why, for example, auditors must have no interests in the companies they audit. It doesn’t prove a lack of bias, but it helps.
The greater the remove a person has from the matter subject to review the greater the prospect they will be objective. This is a well established principle.
The FRC has ignored it. All the poeople it has appointed are compromised by being officials in the very companies being regulated. On this basis we might as well have the directors issue the audit report on their companies. That’s how objective we can expect these people to be.
Respectfully, unlike your argument, this is both plausible and accords with accepted practice for regulation.
Richard
Richard
Also, very politely….
I am not making an argument of my own. I am merely drawing out the assumptions in your argument.
If I was going to make an argument about the composition of the FRC’s Board I would start with relevant expertise and then worry about independence of judgement. But I suspect that we would disagree about the former as much as the latter.
Regards
Mark
Mark
Judges do not need to be experts in the subject they rule upon
Your assumptions are wrong
As is your analysis of my argument
Richard
[…] the bounds of credibility in a system that is far from being properly regulated and is, in effect, an old boy’s club) so protection is […]