By Cliff Weight, Director, ShareSoc
We sometimes see things changing at a glacier-like pace. But once a glacier starts moving it has huge momentum and is unstoppable.
My question is: is this metaphor applicable to the way Government is behaving with regard to business? The civil servants who drive Government policy transcend the short lives of Parliament. Taking this perspective what do we see? My take on this is as follows.
The Financial Crisis terrified nearly everyone. We stared into the abyss. We were lucky. We are not out of it yet. There were lots of people to blame.
The Bankers were clearly to blame. They were the first target. Government has sorted them out. The new FCA and PRA rules and regulations should ensure the Financial Crisis will never happen again.
The accountants and asset management industry were next on the blame list. But it has taken longer to get to them. The Kay Review (2012) laid out the problems and set the agenda. Progress has been at a glacial pace.
What is interesting is the sheer scale of the Government concerted action that is now going on.
We would expect the Treasury and BEIS (the Department for Business, Energy and Industrial Strategy) to be involved and they are.
The FRC, Brydon, Kingman and CMA have been reviewing auditing and accountants.
The FCA have investigated the asset management industry and reported on its high profits, excessive fees and poor value for money/poor performance.
But there are many other Government Departments involved. One reason is the continuing bad headlines of business disasters, excessive pay, gender pay and the lack of diversity. This creates a lack of confidence in business from the general public. Arguably Brexit was an expression of unhappiness with the status quo from the electorate. The Government seems to have got it and is pressing for change from various quarters.
The Department for Digital, Culture, Media & Sport (DCMS) is working on gender pay.
The Department for Work and Pensions is working on value for money that pension funds get from their asset managers and the transparency of reporting back on performance and stewardship.
The Department for Environment, Food & Rural Affairs is looking at sustainability, which may impact ways asset owners invest in the future.
The Stewardship Code is being reviewed by the FRC, whilst the FCA enacts the stewardship parts of MIFID II into UK law and the FCA/FRC are jointly reviewing stewardship in a wider sense and have launched a discussion paper (DP19/1) on this topic.
Our own flagship issue is restoring shareholder rights to individual shareholders, who have been disenfranchised by the nominee accounts system. There are signs that we may be making some headway, but it is still too early to make promises. However, The Law Commission Review is planning a Review of Intermediated Securities (in plain English Nominee Accounts, but it will also cover custodians, voting and plumbing). This is an important first step for us.
Please don’t expect these changes to happen overnight, but there is evidence to suggest that the glacier is on the move and progress will happen.