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Businesses unite for corporate governance reform

Author: ICAEW Insights

Published: 05 May 2022

A letter with more than 50 senior business signatories stresses the need for corporate governance reform amid concerns that a legislative overhaul may be shelved.

A letter to the Prime Minister and Business Secretary signed by a coalition of more than 50 British businesses, trade organisations and unions is urging the government to plough ahead with corporate governance reforms following concerns that legislation expected to be outlined in next week’s Queen’s speech may be shelved.

The Better Business Act, which brings together leaders to lobby for ways of working that balance people, planet and profit, has coordinated a joint letter to Boris Johnson and Kwasi Kwarteng signed by members including senior representatives from Anglian Water, Triodos Bank, Oxford University’s Said Business School and the TUC, to push for action to stop the erosion of trust in business.

The signatories to the letter say there are “grave concerns” that plans for an overhaul of the corporate governance regime may be shelved. “From Carillion to BHS and P&O Ferries, recent scandals have exposed gaps in our corporate governance framework and reduced trust in British business at the precise moment when we need to harness the skills, innovation and enterprise of the private sector to meet the challenges facing society and the environment,” the letter says.

The government’s White Paper on corporate governance and audit reform, published last March, proposes the momentous changes to how businesses are run. They include the establishment of new accounting watchdog ARGA, which would be given a broader remit over company directors and new powers to enable the regulator to better hold company directors to account including potential fines or even suspensions in the most serious cases, such as hiding crucial information from auditors or failing to keep proper accounting records.

Bearing in mind that it is two years since the Brydon Review and four years since the independent Kingman Review of accountancy regulator the Financial Reporting Council, the letter says that “reform is anticipated and long overdue”. It also calls on the government to use the opportunity to review Section 172 of the Companies Act to update directors’ duties and align their responsibility to shareholders with their social and environmental impact. 

The letter also urges the government to use the opportunity of the current reform process to review Section 172 of the Companies Act to update directors’ duties to align their responsibility to shareholders with their social and environmental impact. “It is our view that these changes are necessary and timely. The Queen’s Speech represents an opportunity to once again put Britain at the forefront of global corporate governance,” the letter continues. 

Peter van Veen, ICAEW’s Director of Corporate Governance and Stewardship, said: “In terms of reviewing corporate governance, a stronger governance code including adding social and environmental responsibilities of directors to S172 of the Companies Act would be welcome.”

A Government spokesperson said: “We will set out our legislative programme for the next parliamentary session in the forthcoming Queen’s Speech as is usual.
 
“Our 2021 white paper set out wide-ranging proposals to tackle problems in corporate reporting and audit, including strengthening the powers of the regulator, and we will publish our response to the consultation shortly.”