26 June 2017 by Peter Swabey
Minority Government will struggle to achieve action, says Peter Swabey
So, we had an election. I said last month this would change everything and nothing and, unusually, this time I was right. Greg Clark has been reappointed as Secretary of State for Business, Energy and Industrial Strategy and we await the Government’s response to the Green Paper on Corporate Governance Reform he launched last October.
There are many other issues facing the Government at the moment: Brexit negotiations have begun and the Government is focused on trying to build a majority in the House of Commons. Chris Hodge, ICSA Policy Advisor, published an interesting blog on the ICSA website on 19 May looking at the corporate governance issues in the main parties’ manifestos, but I do not think any of us expected to have to look through the Democratic Unionist Party manifesto for the governance issues (we did, there were none, other than support for the living wage and stricter penalties for companies that do not offer this).
Given the minority position of the Government, it seems likely it will focus on those issues where there was general agreement that action was needed, although it may be difficult to build a consensus around any particular course of action. I therefore expect to see some proposals on executive pay, probably including an annual binding vote. In my view, this makes no sense in terms of addressing any of the potential issues, but it will undoubtedly be popular in the current market environment.
Similarly, we can expect to see proposals around pay ratios. The other common factor between the Conservative and Labour manifestos was a focus on the interests of stakeholders other than shareholders, although, again, the prescribed remedy differs. We look forward to seeing which proposals are put forward, although they are unlikely to be top of the agenda in the coming weeks.
In the meantime, business will continue. By the time you read this article, we are likely to have the implementing regulations for the Fourth Money Laundering Directive, as the deadline is 26 June. These will necessitate changes to the current people with significant control register regime for all companies, notably in terms of the increased frequency of reporting required and the changes to scope, which will remove the current exemption for AIM companies.
More detail was included in a technical briefing on 16 June, but it should be emphasised that, at the time of writing, the regulations have not been published and so there may be other changes afoot.
In other sectors, there has been a degree of reflection – reviewing processes and how governance can be made more effective. On 16 June, at our 2017 Charity Governance Conference, more than 50 delegates heard Baroness Barker speak about the House of Lords Select Committee report on charity governance (the Chair of the Committee, Baroness Pitkeathley, spoke to Governance and Compliance and you can read the full interview on page 16). Rosie Chapman FCIS, Chair of the new Charity Governance Code steering group, also spoke about revisions to the Code, which will be published on 11 July.
Across all sectors, we must also prepare for the General Data Protection Regulation (GDPR). This becomes effective in all EU member states from 25 May 2018, after which non-compliant organisations will potentially face huge fines. GDPR will make significant changes to the way organisations of all kinds store and use personal data and it is extra-territorial.
UK organisations selling goods or services in EU member states, and processing individuals’ data in order to do so, must comply with GDPR, even if the UK chooses not to adopt it post-Brexit.
There has been a lot of public speaking for the policy team recently. Chris Hodge and I were at the Guernsey, Jersey and Isle of Man conferences and Chris also spoke in Ireland. I addressed the National Housing Federation company secretaries’ conference last week, and this week I have engagements at Henley Business School, Brunel University and the Law Society.
All these activities are important in raising the profile of ICSA as a professional body and highlighting the role our members fulfil.
We have also been preparing Professor Andrew Kakabadse’s new report on boardroom tension for publication at our annual conference on 4–5 July. Andrew’s report represents another major piece of research for ICSA and you can expect to read more about it in a future issue.