03 September 2018 by Peter Swabey
External insight is vital to improve the industry, but must be balanced
Well, the waiting is over and we have a new UK Corporate Governance Code. I have written about it in detail and will talk some more about it further on, but it is not the only recent governance development.
Probably the most important of those has been the independent review of the Financial Reporting Council led by Sir John Kingman. We responded to their call for evidence – the full submission is available to read on our website – and it has been interesting to see the variety of views expressed. As I said in our response, one of the difficulties that Sir John and the review team will face is that, although many of the responses they receive will be sensible and well-considered, others will be self-serving, advancing private interests or grinding axes over existing disputes with the FRC.
A regulator will, inevitably, attract more criticism than praise, especially where it is responsible for the oversight of accounting, auditing and financial reporting at a time when there have been some significant market failures. Not all that criticism will be fair or even grounded in fact.
Although we agree that some change at the FRC is necessary, this should not be allowed to adversely affect those areas of the FRC that work most effectively. In my view, one of these is ownership of the UK Corporate Governance Code and it makes no sense to call for this responsibility to be moved elsewhere simply because there are perceived to be issues with other aspects of the FRC role.
Were we to be designing a regulatory structure from scratch, we would probably not design the FRC in its current form. But that does not of itself mean the model is incapable of being made to work. Whatever is done with the supervision of accounting and auditing, corporate governance should stay at the FRC.
One of the key targets for the policy team is to raise the profile of ICSA. The FT–ICSA Boardroom Bellwether was published on 6 August and from a profile-raising viewpoint was one of our most successful yet. In addition to coverage in the Financial Times, the report was picked up in The Times, The Guardian and City AM. I would like to thank all those who responded. Raising the profile of the Institute and of the governance role, which in turn raises the professional profile of our members, is important for all of us. We will be using some of the results from the survey to inform our work over the coming months.
“A regulator will, inevitably, attract more criticism than praise”
I have now finished my round of branch meetings to talk to members about the proposed Charter and byelaw changes. It was great to meet so many of you and to hear your views, especially when so many of you obviously care deeply about our profession and future.
The future is the subject of another piece of work on which the policy team has been working: an analysis of the views of the younger members of our profession on the future of governance, which will be launched on 27 September. Some of the points of similarity and difference with our more established members are very interesting. Watch out for details.
There was a time when August was peaceful – everyone else was on holiday and it was nice and quiet at work. No longer. The team have been responding to consultations on the Scottish governance code for the third sector and UK Sport’s future funding strategy for elite sport (see here for our analysis). We are also working on our response to the NCVO on the draft charity code of ethics and to the FRC on the Wates Corporate Governance Principles for Large Private Companies.
Finally, I promised that I would get back to the new UK Corporate Governance Code. I just want to emphasise that I see this as a huge opportunity for company secretaries and governance professionals. The guidance that the FRC published to go alongside the new code contains a wealth of useful support and creates opportunities for you to show that what we do can really add value to the organisation through effective governance. This aspect of our work has never had a higher profile and this is your chance to seize the initiative in your own organisations and make the new code work for you. Do not waste it.
As always, I would be happy to receive any feedback or suggestions as to what the policy team can do at firstname.lastname@example.org – I would especially welcome ideas for research that would help members in their daily work as we look to define objectives for 2019.