Sir Jan du Plessis, the government’s preferred candidate to head the Financial Reporting Council (FRC), has said the independent regulator is now in a “pretty poor state” due to the failures of its top level managers.
Du Plessis, who has previously chaired some of Britain’s major companies including BT and Lloyds TSB, vowed to “address governance at the top” of the FRC if given the opportunity to chair the regulator, as he warned Big Four firms that they may suffer if they fail to cooperate.
Speaking at a pre-appointment hearing held by the UK government’s Department for Business, Energy, and Industrial Strategy (BEIS) Du Plessis noted that the FRC currently has three non-executive directors, but that it has not had a permanent chair for “goodness knows how long.”
“It’s really, really not a way to run the regulator that should be setting the tone for the whole of British business,” Du Plessis said.
The South African businessman said its “time for a new beginning” at the FRC, as he claimed the FRC has “evolved in a very British manner” which has seen it rely on “informal understandings and arrangements that do not have a basis in the legislation.”
Du Plessis’ comments come after the government announced plans to replace the FRC with a new regulator, the Audit Reporting and Governance Authority (ARGA), with a view to expanding the regulator’s powers.
“If we are serious about really doing the best we can to try and avoid some of the corporate scandals and collapses we’ve seen in recent years… it’s time to make a new beginning”Sir Jan du Plessis
Du Plessis claimed a shakeup could be an “opportunity for Britain to lead the way,” as he claimed the UK has had “enourmous” influence over corporate governance across the globe.
However, in a warning to Big Four firms, Du Plessis said: “I hope they realise that unless they play their part in creating a different regime, the outcome could be much worse for them.”
Du Plessis said that “there is no doubt that over the last five, 10, 15 years, societal expectations of business have grown dramatically,” as claimed that the days of the board of directors running companies in the interest of shareholders are over.
Nonetheless Du Plessis said regulators must also take responsibility for situation, as he stated that “we cannot just look at the audit profession, and expect them to provide the answers, if we are going to collectively avoid these scandals in the future.”