You are here > Home > News
Effective corporate governance 'needed for UK'
General News |
More action is needed to deliver effective corporate governance in the UK, the Financial Services Authority (FSA) has claimed.
Hector Sants, chief executive of the industry regulator, said this is crucial to delivering financial markets and institutions that businesses and consumers can trust.
"Management are responsible for running businesses and ultimately firms fail because of the decisions taken by their boards and their management," he stated.
"These decisions are made within a firm's corporate governance framework."
Mr Sants said the 2008-09 financial crisis exposed "significant shortcomings" in the governance and risk management of firms and the culture and ethics which underpin them.
"This is not principally a structural issue. It is a failure in behaviour, attitude and in some cases, competence," he claimed.
"Ultimately, the purpose of financial markets is to serve everyone, not the personal interests of individuals. We will only really have learnt the lessons of the crisis when this is recognised by all."
Mr Sants suggested that, when the crisis occurred, there were many senior executives and non-executives in key board positions who lacked the technical skills needed to manage the risks in their banks.
"There was, in consequence, a general recognition that the regulator should seek to address this problem," he added.
The FSA does this by assessing the suitability of a candidate to undertake a role, and crucially, by ensuring an appropriately robust, rigorous and yet proportionate appointment process is undertaken by the firm, Mr Sants noted.
However, he said the regulator is not trying to be 'gate keeper' to everyone.
"Except in rare circumstances the FSA will not interview non-executives unless they intend to occupy senior non-executive roles," Mr Sants stated.
"There may be exceptions to this but in those circumstances firms should expect their supervisors to explain the reasons behind this decision."
Mr Sants commented that a firm's culture is central to achieving good governance.
"Ultimately, however, even a successful regulatory regime will not be sufficient to ensure good outcomes," he stated.
"Crucially, firms need to have an appropriate culture and one that is focused on the firm delivering the right long-term obligations to society."
The right cultures are rooted in strong ethical frameworks and the importance of individuals making decisions in relation to principles, rather than short-term commercial considerations, Mr Sants stated.
"In particular, this means that when a regulator expresses a clear instruction then firms should not continue to resist for reasons of expediency and short-term gain."
Posted by Dan Smith
Accountancy Recruitment Agency - Transparent Recruitment Fees Since 1999 - 12.5% Fee / 3 Month, 100% Rebate.
Sign up to our e-newsletter service to receive our headline news directly to your inbox