BusinessCorporate FinanceOn the money with Gavin Hinks

On the money with Gavin Hinks

There came an opportunity last week for finance directors to point the finger at their auditors and say: ‘Ha, see how you like it!’

The reason? The FRC came up with a set of proposals to reform the audit
market which included the recommendation that all auditors working on the
accounts of publicly listed companies should also comply with the provisions in
the combined code on corporate governance.

Apparently there was a chorus of ‘we already do,’ until someone asked a
question about independent directors.

I stand to be corrected, but a quick survey of the largest firms revealed no
trace, no hint not even a suggestion that anyone remotely like an independent
non executive director currently works with the management boards of the biggest
firms.

So there’s a point to argue – will the big firms (including the larger mid
tier firms) really invite outsiders in to participate in running the practice?

Perhaps I’m being unfair – maybe the firms are ready for this. But are they
ready for the combined code clause which says that directors shouldn’t take part
in setting their own pay? After all, in the case of these board members, they
actually own the firm.

At PricewaterhouseCoopers the management board is made up of a group of
partners, while the remuneration committee is staffed by some of those partners
who apparently decide on the profit share of the chairman and the board members.

You can see how awkward this could be.

But I suspect the firms and their boards are above petty efforts to keep
their pay a secret. They have a history of modernising their governance and it’s
not so long ago that firms didn’t even publish their annual reports.

The question will make for an interesting summer of debate.

Gavin Hinks is editor of Accountancy Age

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