The focus of business before last week’s General Election was understandably Labour’s manifesto and its radical plans to, among other things “amend the Companies Act, requiring companies to prioritise long-term growth while strengthening protections for stakeholders, including smaller suppliers and pension funds”, “require one-third of boards to be reserved for elected worker-directors” and that “up to 10% of a company will be owned collectively by employees…” through “Inclusive Ownership Funds (IOFs)”. Now that the Conservative Party has been returned to power with a large majority, what can business expect in the corporate governance arena?
In the Conservative Party election manifesto, there were pledges as follows:
- “We are strengthening the UK’s corporate governance regime…”;
- “…will reform insolvency rules and the audit regime so that customers and suppliers – and UK taxpayers – are better protected…”;
- “… improve incentives to attack the problem of excessive executive pay and rewards for failure…”; and
- “…reintroduce legislation that protects pension pots from being plundered by reckless bosses…”
We expect this will mean that the Conservatives:
- return to the recommendations in the response to the Government’s March 2018 Insolvency and Corporate Governance consultation paper, including the possible introduction of measures to disqualify directors of holding companies which do not give due consideration to the interests of stakeholders of a financially distressed subsidiary when it is sold, require companies to report on their distributable reserves and report more details of group structures;
- seek to implement a number of the recommendations in relation to the audit market and audit regulation arising from the Kingman Review, including the recommendation that the FRC is replaced with an independent statutory regulator called the Audit, Reporting and Governance Authority, the Brydon Review (published yesterday) on the quality and effectiveness of audits, and the Competition and Markets Authority recommendations which recommended an operational split within audit firms of audit and non-audit services; and
- reintroduce the Pension Schemes Bill from the last Parliament, including the new criminal offences and regulatory powers relating to failures in relation to DB schemes – read more on that on our pensions Policy Matters post here.
We will keep you updated in the coming weeks and months.