25 January 2016 by Henry Ker
With a number of new regulatory requirements coming in 2016, we asked members of the Governance and Compliance/Core community if they see the year ahead being a more challenging one for governance professionals. There is clear agreement that there will be an increase in workload, with 78% answering ‘yes’, 20% answering ‘no’ and 2% hedging their bets.
We asked what the biggest change is likely to be this year. Although each sector will have different priorities and various industry-specific regulations to respond to, there are some clear frontrunners.
The most common element that respondents are expecting to add to their workload is the introduction of the Market Abuse Regulation (MAR). MAR has noble aims, raising market integrity and investor protection and offering a level playing field across the EU, but its implementation is considered burdensome as it was mentioned by just over a quarter (26%) of respondents. The second most common answer was the People with Significant Control (PSC) register, currently due for implementation by the Small Business, Enterprise and Employment Act 2015 in April 2016, with 15% of respondents flagging it. The Senior Managers Regime came in third with just over 10% of respondents mentioning it.
Not only did respondents name the PSC register as adding to their workload, they were also negative about whether it would help avoid future governance scandals – 66% of respondents did not believe it would. One stated: ‘It is a complete waste of time and unnecessary’ and another added: ‘People will always find ways to exert influence and behave badly’. Another said: ‘Every form of regulation can eventually be evaded by those determined to do so. Those who comply anyway will just have more work to do’. There is a common view that ‘it just adds a layer of bureaucracy, it will not prevent people seeking to hide control in any way they can’.
However, one respondent qualified this view, stating that although the register is ‘unlikely’ to help prevent governance failings, it is because ‘historical governance scandals have been largely attributable to culture rather than the adequacy of record keeping/administrative requirements – [it is] not clear what the PSC will add above and beyond existing public records’. As explained here, there is a feeling among our community that ‘secret’ owners exerting undue influence is not a major factor in governance disasters.
Another opinion is that the register is just one measure of many that needs to be in place to prevent future governance failings. In isolation, the PSC register is unlikely to achieve significant progress. As one individual said: ‘It is a [single measure] that may form part of a number of measures. It will not in itself prevent them. Poor decisions can be made by people that are not deemed to have ‘significant control’ and there may be governance scandals not necessarily linked to finance, such as breaches of confidentiality [or] data protection.’
There were some respondents who backed the significance of the PSC register: ‘It is a further “lifting of the veil” in order to determine who or what entity controls a particular company’. Most who answered positively added that they had reservations about its implementation however, ‘the challenge is to get people to recognise what they need to declare and to do so’, and another added, ‘I fully support the concept … but my concern is that the implementation is not optimal, and so the aims will not be achieved.’
If you are a company secretary or governance professional at a leading UK business, and you would like to take part in or comment on future surveys, email firstname.lastname@example.org
Conducted in association with The Core Partnership