So the party faithful are in love with Peter Mandelson. If only for the first
time. But auditors? At the moment they’re going to be a little less easy to woo.
And that’s because the business secretary, it emerged last week, has proven
impervious when it comes to auditors’ demands that they should have more legal
protection from crippling law suits. In short the business secretary has turned
auditors down flat.
It all goes back to Enron, as so much in the accounting sector does. With the
death of Andersen reducing the number of global audit firms to four, those that
remain have argued they need protection from from big legal claims when
companies go bust.
The government was responsive to this request and passed legislation
permitting auditors to negotiate liability caps with their clients. Trouble is,
clients have proved completely unenthusiastic about this. Indeed, it is
understood that to date no blue chip company has seen any reason why it should
agree to cutting liability limits for their shareholders. What’s more, US
financial watchdog the SEC, refused to endorse the liability cap policy. Because
of the connections between UK and US business the liability policy became
senseless without SEC backing.
So, the Big Four turned to government hoping they would bring in more
legislation. But it became clear last week that Mandelson has put the kibosh on
What will happen next?
Lobbyists from the Big Four are a determined bunch and were clearly unhappy
about Mandelson’s decision. PwC campaigner Peter Wyman was quoted in The Times
saying: “The government, having legislated to allow proportionate liability for
auditors, is apparently content to have its policy frustrated by a foreign
Suggesting the government may have abdicated sovereignty means the gloves are
really off. There’s no need for diplomacy any more.
But then the Big Four probably feels it no longer needs to go cap in hand to
the sitting government anyway. With next year’s election looming, the lobbyists
have already turned their attention to the Tory shadow ministers.
Insiders say their real efforts at persuasion will take place this week in
Manchester at the Tory party conference. Brutally, they say there was no need to
be in Brighton last week trying to talk Labour round. There was little or no
effort to follow up with Mandelson on his decision. And besides, Labour has
bigger problems to deal with.
But will the Tories be receptive? Big Four lobbyists are still working in a
climate where the reputation of business is at pretty low ebb. Politicians might
be reluctant to do anything that could be viewed as letting business, especially
big business, off the hook.
On the other hand they might be convinced by the argument that preventing a
Big Four firm from going under is best for business and the economy in the long
Perhaps only the election will tell. One thing is for sure. The lobbying
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