How often do we all ask ‘Who is holding company directors accountable for their actions (or lack of actions)? The failures of big companies in recent years, including Carillion, Thomas Cook and BHS, have rocked the confidence of both the public and investors. When big companies go down, the impact is felt by many smaller businesses, and by many individuals too when thousands of jobs are lost. As tax payers, we are all penalised when businesses fail.
The UK government has today launched a 16-week consultation on proposals to improve audit and corporate governance, to improve the regulation of business and safeguard jobs. Company directors will have to ensure accounts are accurate, or face more serious penalties, including fines or suspensions for deliberate or negligent wrong-doing. Directors may be required to repay the bonuses they have received if failure occurs up to two years afterwards. There may be a requirement for annual ‘resilience statements’ to be published, explaining how the company is managing key risks. There are also plans to break up the dominance of the ‘Big Four’ audit firms.
Ultimately, the aim is to strengthen the UK’s position to attract investors, and to improve focus on the long-term success of businesses, for the benefit of all involved. It is proposed that a new regulator will be established, ‘the Audit, Reporting and Governance Authority (ARGA), replacing the Financial Reporting Council (FRC). It would have legal powers to take action when serious lapses have occurred.
The consultation is open until 8 July 2021, and can be accessed here.