The government has published its response to six recommendations made by MPs to try and stop major corporate collapses like that of Carillion earlier this year from happening again and to beef up regulators’ powers.
In a document published last week, the government confirmed the Competition and Markets Authority (CMA) was "actively considering" breaking up the "big four" accountancy firms into more audit businesses and detaching audit arms from those providing other professional services.
However it was less clear what action the government would be taking when it came to other recommendations made by the joint inquiry’s report, published earlier this year.
Following a recommendation that the government and regulators consider a minimum standard for bonus clawback for all public companies, the government said "the circumstances in which executive bonuses and other variable pay can be withheld or recovered is ultimately a matter for a company’s shareholders".
The report also called for it to be possible to investigate all directors who exert influence over financial statements, not just those with accounting qualifications.
Government satisfied with FRC, IS and FCA roles
The government said that the Financial Reporting Council (FRC), Insolvency Service and Financial Conduct Authority (FCA) were already working together to improve their practices in respect of co-working to ensure breaches could be investigated, including breaches of directors’ duties.
The joint inquiry also urged the government to give the FRC the necessary powers to become a "more aggressive and proactive regulator", to which the government said the FRC’s remit had already "developed considerably" since it was established. It also pointed to a Memorandum of Understanding between the FRC and FCA that allows them to work together in cases of corporate failure.
The joint inquiry also claimed the current Stewardship Code" was insufficiently detailed to be effective and needed "teeth". The government responded by highlighting the fact that the FRC was consulting on a revised Stewardship Code later this year.
Finally, the Insolvency Service responded to the joint inquiry’s concerns that the decision by the court not to set any remuneration terms for the appointment of PwC as Special Manager of Carillion displayed a "lack of oversight" and that Special Managers should not be given a "black cheque" when appointed.
The Insolvency Service said that special managers’ remuneration had to be considered and agreed by the court, prior to which the Official Received must be satisfied that the application to court is appropriate and therefore the remuneration is subject to official judicial scrutiny. It added that a protocol had been agreed between the Official Receiver and PwC setting out the work that the special managers carry out and the governance that applies.
- In a separate update, the Official Receiver has revealed that 65 Carillion workers have been transferred over to new suppliers with the past week, while 15 have been made redundant. It means that to date 13,495 jobs have been saved (73% of the pre-liquidation workforce) and 2,422 (13%) have been made redundant.
