An expanded role for auditors in governance

How much more work should auditors do for quoted companies? How comfortable are shareholders with the potential for further dilution of the independence of the annual audit? We don’t have the answers immediately to hand, but responses to the Federation of European Accountants’ (FEE) latest discussion paper on the potential role of auditor’s assurance in respect of corporate governance statements might be instructive.… Read the rest

When Auditors Quit: what should shareholders know?

In the UK legal landscape, the role of the auditor has a particularly important and specific role – not to aid efficient trading markets – but to support the stewardship of the company. With the increased regulatory focus on the role of shareholders in the stewardship process it is particularly apt timing that the UK’s Department of Business, Innovation & Skills wants to know what shareholders think about the information provided to them when auditors leave office.… Read the rest

FRC to consult on Stewardship Code

The Financial Reporting Council has welcomed the recommendations of The Walker Report and confirmed its committment taking ownership of the proposed Stewardship Code, subject to consultation.

The FRC is set to issue a report on its own review of the impact and effectiveness of the Combined Code in early December, together with a draft revised Code which will be subject to consultation.… Read the rest

UK – shareholders to get independent Stewardship Code

There’s no small irony that Lloyds Banking Group will be asking 2.8 million private shareholders to back its £13.5 billion fundraising, the biggest deal of its kind in UK history, on the same day that Sir David Walker makes his final recommendations to Her Majesty’s Government on how the governance of the UK financial sector governance should be overhauled.… Read the rest

US pension fund adds to credit rating agency woes

Five of Ohio’s public pension funds have joined California in pursuit of recompense from the three dominant credit ratings agencies (CRAs), Standard & Poor’s, Moody’s and Fitch. Ohio’s Attorney General, Richard Cordray estimates that the five funds involved in the case lost more than $457 million from investing in triple-A rated in mortgaged backed securities.… Read the rest

RI and financial performance – positive links says new study

Environmental, social and corporate governance (ESG) factors can have a positive impact on portfolio returns, according to a growing body of academic research. In a new report, “Shedding Light on Responsible Investment: Approaches, Returns and Impacts”, investment consultants Mercer summarise and comment on sixteen academic studies, the majority of which (ten) show a positive relationship between ESG factors and companies’ financial performance, four of which show a neutral relationship and two which show a neutral to negative relationship.… Read the rest

Investors: Engaging for Godot?

Investors should be made to engage – or so it has been suggested. Speaking at last week’s CEIOPS conference (Committee of European Insurance and Occupational Pensions Supervisors) Patrick Brady, chair of the Joint Committee on Financial Conglomerates (JCFC), aired the idea that institutional investors should be mandated to engage.… Read the rest

Parmalat auditors settle with investors

Leading international investors have settled terms with the auditors involved in the collapse of Italian diary giant which filed for bankruptcy protection in 2003. After the firm revealed a multi-billion Euro hold in its accounts, Parmalat became known as “Europe’s Enron”.… Read the rest

ISC’s pre-emptive strike against Walker

The UK’s Institutional Shareholder Committee (ISC) has issued as pre-emptive strike against potential legislation from the Walker Review with the publication of a voluntary code of conduct for its members. The “Code on the Responsibilities of Institutional Investors” outlines seven principles of shareholder engagement and stewardship which, like the Combined Code, will be applied on a “Comply-or-Explain” basis.… Read the rest

Is financial history more or less bunk?

Henry Ford is frequently misquoted as saying “History is bunk” what he actually said was: “History is more or less bunk. It’s tradition. We don’t want tradition. We want to live in the present and the only history that is worth a tinker’s dam is the history we made today.” Looking at the current state of the financial services industry, one of Ford’s contemporaries, Louis Brandeis, may have preferred to side with George Santayana’s sentiment: “Those who cannot remember the past are doomed to repeat it.”

Louis Dembitz Brandeis (November 13, 1856 – October 5, 1941) was a United States Supreme Court Justice from 1916 to 1939. … Read the rest