Major businesses have a huge capacity for good by generating jobs and wealth. They also have a huge capacity for bad if they injure innocent people. Scandals such as pensions misselling, BSE, Maxwell, and BCCI are a visible reminder of how innocent people can be hurt.
So corporations must be made publicly accountable if we are to achieve what all political parties now aim at: business serving the people.
The Hampel Committee was asked to examine ways of enhancing this public accountability but, sadly, the business leaders who dominated the committee put their own convenience first. They preferred secrecy to public sunlight and the untrammelled will of CEOs to employee involvement.
Always anxious to line up with the powerful business lobby, the auditing industry is now playing the same tune. The latest proposals from the Auditing Practices Board say auditors should report ‘privately’ on internal controls to company directors. This is a monstrous failure of responsibility by the APB.
The APB claims that it will encourage dialogue. What dialogue did such ‘private’ reporting achieve at BCCI, Maxwell and Polly Peck? It is only public reporting which arms stakeholders, exposes weaknesses and exerts pressure on management.
The APB does not offer any moral or ethical justification for keeping the people in the dark. It can’t. Any auditor who knows a system of internal controls is deficient yet remains publicly silent has to be viewed as negligent and can’t be seen to be performing their work with ‘due care’.
The auditing industry must make up its mind. It wants public privileges and enjoys statutory monopolies. Auditors’ reports on internal control and any letters to the audit committee must be publicly filed just as they are in the US. In the UK, auditors wheel out a ‘duty of confidentiality’ to clients to defend every aspect of the status quo. In effect this says ‘private’ interest should take priority over ‘public’ duty and auditors should only be concerned with appeasing that powerful business lobby which markets their services.
When that business lobby, too, wants to keep the public in the dark the combination is disastrous, not just for accountability but for building good companies.
Austin Mitchell is Labour MP for Great Grimsby.
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