A significant overhaul of Audit regulation and Corporate Governance oversight in the UK has been in the making since 2018.
Fidelio has previously outlined the number of enquiries, commissions and proposals that have been drawn up in the UK in recent years to reform the regulation of corporate governance.
While there were concerns about the potential burden of regulation in many quarters, there was also recognition that the basis of regulation did need to change.
Through Fidelio’s Board Evaluations in particular, we see the need for a clear and stable regulatory environment. This creates predictability and practical frameworks for Board Directors, company auditors and of course shareholders.
It was noted with concern therefore that, over four years and three enquiries after the 2018 collapse of Carillion in the UK, that the package of corporate governance reforms proposed last year has been further delayed.
Though aspects of the proposed reforms have been regarded in some quarters as unduly restrictive, the core proposal for a newly constituted regulator as successor to the Financial Reporting Council (FRC) has received wide support. The current regulatory framework where the FRC has no powers over Directors other than via professional accountancy bodies has proved to be cumbersome, in particular when Director failings sit outside the Audit Committee. Delays in providing the regulator with its necessary statutory powers threaten to further erode effectiveness and morale.
The UK has acquired a reputation as a crucible for governance – many approaches developed here extend to other markets. While business is always wary of over-regulation, good regulation contributes to effective governance. As the UK thinks critically about its position internationally the importance of corporate governance should not be overlooked. Today business faces extraordinary uncertainty, both macro-economic and geo-political. As far as possible, uncertainty of regulatory outlook for Board Directors should not compound the problem.
To read Fidelio’s original article ‘Governance – A Commentary’, please click here.