LONDON (Reuters) - Britain’s accounting and corporate governance watchdog has called on the government to give it powers to punish directors of listed companies caught up in financial reporting breaches.
The Financial Reporting Council (FRC) made its call as it announced a fundamental review of its 25-year-old codes of best practice for companies.
The FRC said that it also wants company boards to take better account of stakeholder views and ensure there is a link between executive pay and performance.
The watchdog was responding to a discussion paper from the government on reforming corporate governance, though FRC Chairman Win Bischoff said the basic tenets of the body’s codes would not be changed.
“In pursuing any changes, the current strengths of UK governance: the unitary board, strong shareholder rights, the role of stewardship and the ‘comply or explain’ approach, must be preserved,” he said in a statement.
The “comply or explain” approach refers to companies disclosing how they complied with FRC codes or saying why they chose not to apply them.
Being given powers to punish company directors caught up in financial reporting breaches would mark a significant widening of the watchdog’s remit.
The FRC’s existing powers mean it can only ban or fine company executives who are trained accountants or actuaries belonging to professional bodies. It would be up to the government to bolster the watchdog’s powers.
The FRC said it would start a public consultation on its proposals later this year based on the outome of its review of the codes and responses to the government’s discussion paper.
Reporting by Huw Jones; Editing by David Goodman