This government seems to have quite a low opinion of business. Just not low enough to regulate it properly.
Big business has found itself accused of various failings in recent years — from inadequately preparing for a Brexit that hadn’t yet been negotiated to neglecting to single-handedly overhaul the labour market to boost UK productivity.
You’d think the government would want to keep an eye on these cowboys. Instead, there are key positions unfilled at important regulators, notably ones being handed additional powers and responsibilities.
The Financial Reporting Council is centre stage in the government’s efforts to overhaul audit after failures like Carillion and Patisserie Valerie. Government has proposed giving a beefed-up regulator new powers to oversee the largest unlisted companies and to take a tougher line with the Big Four accountants.
But (embarrassingly for the upholder of corporate governance) its board is half empty. Sure, boss Sir Jon Thompson is getting on with reinvigorating what used to be a lapdog of the industry it oversaw. But interim chair Keith Skeoch has just left — and 17 months after Simon Dingemans stepped down to join Carlyle, and one failed recruitment process later, there isn’t a replacement. A new round of applications closed this month. In the meantime, after a series of departures, the FRC has just three non-executives.
The Competition and Markets Authority is, if anything, a sorrier tale. The CMA, already a muscular and important regulator in economic terms, is getting new powers to levy fines where it judges consumer protection law has been broken; a new digital markets unit is being charged with grappling with the power of Big Tech.
Yet after one failed recruitment round, the tenure of interim chair Jonathan Scott was extended this month. Sixteen months after Andrew Tyrie departed, and amid frustration with the CMA’s technocratic style as a consumer champion, the process to replace him must start again.
Such delays have real-world consequences, not just because these are both regulators in flux. The FRC needs a heavyweight at the helm to counter aggressive lobbying by the audit profession around proposed reforms. The CMA is likely to be seeking a new chief executive next year, with Andrea Coscelli expected to step down at the end of his term.
The government says it makes hundreds of appointments each year and that these “must adhere to high standards”. And a public appointments system that seems slow to private sector candidates isn’t new. But big jobs appear to be piling up: the Financial Conduct Authority will also be looking for a new chair after news this month of Charles Randell’s early departure.
Granted, the small matter of a pandemic hasn’t helped. But this appears a broader problem. A 2019 report from the Commissioner for Public Appointments found that over half of vacant positions were failing to hit a target of announcing a result within three months of a competition closing. Exceptional appointments made without a competition were two and a half times the 2018 level in 2020, according to analysis by the Institute for Government, and this year looks set to meet or exceed that tally.
There are some practical issues, like what other activities or business interests an appointee is permitted. Ministerial churn doesn’t help and there are complaints of long delays getting political approval both from ministers and Downing Street at various stages of the process. That, in turn, leads to second-guessing by officials of what it is that everyone actually wants.
One issue, raised by outgoing Commissioner Peter Riddell, is that the balance between finding good, credible candidates and politically acceptable candidates is under threat.
This has been most obvious in the wranglings over the failure of an assessment panel to choose former Daily Mail editor Paul Dacre to chair Ofcom. But it is a feature across the board, according to people familiar with the matter: “This is a government that wants its people in these jobs . . . they’re suspicious of names that come through an official process” said one.
This risks becoming a vicious cycle. Candidates with other opportunities struggle to see out an interminably slow process or are deterred from applying in the first place by a sense that their ideology (perceived or actual) will rule them out. Potential chairs worry that they will be unable to reappoint directors or influence the direction of their board.
And those with experience in the corporate world decide that may count against them with a government that has shown little affinity with or interest in business — unless, of course, it is looking for someone to blame.
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