As the UK gears up for the national elections on May, the general public has now received nearly all of their “notices of meeting” ahead of casting their ballots. Sadly, there won’t be any electronic voting – but then the residents of Florida would probably say we should be grateful for a stubby little pencil on the end of a piece of string and a rickety wooden booth.
Governance has barely been away from the headlines over the past two years so we thought it would be interesting to take a look at the manifesto policy proposals for each of the three leading political parties to see what they have to say. In true independent and impartial analysis methodology we have been through each of the manifestos published so far and present the key findings – in alphabetical order.
The most well known position statement of the Conservative party is the proposed abolition of “the failed FSA” which has been long trailed. For all the suggestions of “Joining the Government of Britain”, there’s very little we can find on “Joining the Governance of Britain”. So what is on the table?
- Reform regulation of the system. Creation of a strong and powerful Bank of England with authority to ensure financial stability. Bank of England responsible for macro-prudential regulation, judging and controlling risks to the financial system as a whole.
- “Powerful” new Financial Policy Committee within the Bank, working alongside the Monetary Policy Committee, which will monitor systemic risks, operate new macro-prudential regulatory tools and execute the special resolution regime for failing banks.
- Financial Services Authority will be abolished.
- Crackdown on bank bonuses. The money that taxpayers have provided to support bank lending must not be diverted into significant cash bonuses. The cash that would have been paid out in bonuses should be put onto banks’ balance sheets, explicitly to support new lending. This should be a condition of continuing to receive taxpayer guarantees and liquidity support.
Media speculation about a new “Cadbury Law” to protect UK companies from unwelcome foreign takeovers appears to be in the right ball park. Labour party proposals so far encompass:
- Foster a culture of accountable boards, and committed shareholders – all with a culture of long term commitment;
- Strengthen the 2006 Companies Act where necessary to better reflect these principles;
- The UK’s Stewardship Code for institutional shareholders should be strengthened will require institutional shareholders to declare how they vote;
- Banks to put their remuneration policies to shareholders for explicit approval;
- Companies should be more transparent about their long-term plans for the business they want to acquire;
- There needs to be more disclosure of who owns shares;
- A requirement for bidders to set out how they will finance their bids and greater transparency on advisers’ fees; and
- There should be a higher threshold of support – two thirds of shareholders – for securing a change of ownership and the case for limiting votes to those on the register before the bid should be examined.
Lib-Dem leader Nick Clegg is promising big changes in the City which he describes as “change as fundamental as the Big Bang of the 1980s, for the better, not the worse.”
To that end the Lib-Dem manifesto lays out its five point plan for reform aimed squarely at the banking sector:
- No cash bonuses – We will require all bonuses in excess of £2,500 to be paid in shares. These shares will only be redeemable after five years; it will be written into the right of entitlement of these shares that they will revert to the company if they are pledged or used as security prior to the date of their redemption.
- No bonuses at board level – This is not to say that board directors should not be well paid, but that they should have the long term interests of a company at heart – bonus payments do not encourage this.
- No rewards for failure – Extension of the Financial Services Act to ensure that no regulated institution which has made a loss can pay discretionary bonuses.
In a pre-manifesto briefing the party expanded on their key themes with:
Total transparency – publication of the names of all bank staff that have salaries and bonuses that are greater than the Prime Minster’s salary (just under £200,000). FSA to publish its assessment of all regulated firms remuneration policy.
Holding directors to account – FSA powers extended to ensure that the directors of banks are personally fined if their institution breaks the current code of practice for remuneration.
From the main manifesto section “Enterprise in a Fair Society” there is clear signposting of the party’s intentions.
Effective corporate governance and responsibility:
- Provide stakeholders with reliable information on corporate responsibility.
- Ensure that takeover rules serve the UK economy.
- Restore the “public interest test” with a wider remit.
- Revision of bid timetables to reduce uncertainty.
- Only shareholders registered at that start date of the bid will be eligible to vote on the takeover proposal.
Corporate Responsibility issues are addressed with “daughter of OFR”, a Corporate Responsibility Review encompassing environmental and employment issues.