Sir Martin Sorrell: Reforms contradict policy

Proposals to reform audit and corporate governance “contradict” prior government policy aimed at encouraging stock market listings in the UK, according to Sir Martin Sorrell, founder and executive chairman at S4 Capital.

The founder of advertising giant WPP, known for being one of the UK’s highest paid corporate executives, said in an email that he “welcomed” tougher measure on fraud and efforts to reduce the “Big Four oligopoly”, but that he was concerned the proposals would discourage entrepreneurs.

“There’s also a contradiction in government policy. Lord Hill’s recommendations, which the chancellor included in his recent budget speech, are aimed to encourage stock market listings in the UK, particularly of owner-managed new economy companies,” he said.

The UK Listing Review, led by Lord Hill, set out plans to make it easier for firms to list and grow in the UK. They included recommendations around updating listing rules to allow dual class share structures on the London Stock Exchange and liberalising rules around things like special purpose acquisition companies (SPACs).

“This new report, from another government department, may well encourage such companies to go elsewhere, particularly as they have to deal with the challenges of globalisation, climate change, the coronavirus and Brexit – all at the same time,” Sir Sorrell added.

“It may be a case of bad timing.”

The department of Business, Energy and Industrial Strategy (BEIS) launched its plans for a major overhaul of audit and corporate governance regulation today, and included recommendations that directors of the UK’s largest listed companies will face much greater responsibility over the accuracy of their accounts.

In addition, directors could face suspensions, fines, be forced to redo accounts and have bonuses reclaimed if there are significant errors or failings.

BEIS was not able to immediately comment on Sir Sorrell’s concerns, but business secretary Kwasi Kwarteng said in a statement: “By restoring trust in our corporate governance regime and encouraging greater transparency, we will provide investors with clarity and certainty, cement the UK’s position as the best place in the world to do business, and protect jobs across the country.

Earlier, Bob Neate Mazars UK head of audit had predicted that directors like Sorrell would hit back against the proposals.

“Unless you are a qualified accountant who’s also a director or a lawyer who’s also a director, it is very difficult if you’ve been negligent in your duties to have action taken against you,” he said.

“Clearly, people won’t like that additional sense of accountability and the action that can be taken against them, but my personal view is that it’s not a bad thing.”

The white paper for reforms now enter a 16-week consultation period, so the final legislation may look markedly different from the recommendations in the report.

Deloitte UK managing partner Stephen Griggs also said in an email that it was “critical” that this consultation involved not only audit firms and policymakers, “but investors, company directors, audit committee chairs and industry bodies at large”.


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