2 July 2012
Bob Diamond has written to all Barclays staff about the LIBOR scandal and the resignation of the bank’s chairman. The most interesting part of the letter concerns the failures of Barclays risk management:
“The events revealed last week arose in large part because we did not have appropriate controls in place. Frankly, we misjudged the risk associated with the underlying activity. That must never happen again. Once we better understood the risks, we put in place the right controls and systems.”
Mr Diamond doesn’t address the question that is likely to preoccupy the Treasury Select Committee on Wednesday: to what extent did he know about the incorrect LIBOR submissions at the time they were made?
See also: Lord Turner on financial regulation: “A group of very clever people…completely failed to address the fundamental issues”
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Posted in Directors, Financial services and market conduct, Risk management |
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2 July 2012
The chairman of Barclays, Marcus Agius, has resigned following the LIBOR scandal. Mr Agius said in the bank’s statement:
“…last week’s events – evidencing as they do unacceptable standards of behaviour within the bank – have dealt a devastating blow to Barclays reputation. As Chairman, I am the ultimate guardian of the bank’s reputation. Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside”.
The bank has started an independent review of its business practices:
read more »
Posted in Directors, Financial services and market conduct, Risk management |
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28 June 2012
The Department of Business, Innovation and Skills today published the draft regulations that will implement the Government’s plans to reform the pay of quoted company directors. The regulations are contained in this consultation document. The accompanying BIS press releases are here and here.
read more »
Posted in Companies Act 2006 and company law, Consultations, Corporate governance, Directors, Equity capital markets, Reporting and accounts, UK government |
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28 June 2012
Here is the letter sent by the Barclays Chief Executive to the Chairman of the Treasury Select Committee tonight. Excerpts are copied below .
The letter says that the attempted manipulation was done for two reasons:
- To benefit trading positions.
- More interestingly, in relation to the LIBOR setting process during the credit crisis. That was to attempt to reduce the market perception that Barclays was suffering higher funding costs than other banks.
The key question that the Barclays letter raises, but does not answer, is who took the “decision to lower submissions” in relation to that second reason. It seems ill-advised that Barclays has released a letter that so obviously poses this question but leaves it unresolved. The bank will be under pressure to provide an answer.
read more »
Posted in Directors, Financial services and market conduct, Regulators, Risk management |
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26 June 2012
As we reported here last week, the Secretary of State withdrew his action to have the former directors of Farepak Food & Gifts Limited (Farepak), and its parent company European Home Retail Group PLC, disqualified as directors.
The former directors had been widely blamed in the media and by action groups for the collapse of Farepak, a company that ran a Christmas savings club and whose collapse in 2006 led to over 100,000 customers losing almost all of their deposits.
The judge presiding over the disqualification action, Mr Justice Peter Smith, made a statement following the withdrawal of the disqualification action last week. In that statement he made clear that blame had been wrongly attached to the directors:
read more »
Posted in Companies Act 2006 and company law, Directors |
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21 June 2012
Following yesterday’s announcement by the Government on how it will legislate to give shareholders of quoted companies greater control over directors’ pay – which we covered in this post - the Financial Reporting Council has today published a report on “A single figure for directors’ remuneration”. Accompanying press release here.
The aim of the report, which comes out of work done by the FRC’s Financial Reporting Lab, is to suggest a methodology by which quoted companies can publish a single figure for the pay of each of their directors. The report will support the Government’s intention, in its proposed pay reforms, to require quoted companies to publish that single figure in the pay “implementation report” that a company will need to publish in its annual report.
The FRC’s report runs to 15 pages and contains multiple tables, suggest disclosure approaches and appendices – suggesting that the production of a single figure that is meaningful (and comparable across other companies) is, as might be expected, not going to be straightforward. Cold towels all round.
See also: FRC to consult on directors’ pay in support of the Government’s reform plans
Posted in Companies Act 2006 and company law, Corporate governance, Directors, Equity capital markets, Regulators |
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21 June 2012
Following yesterday’s announcement by the Government on how it will legislate to give shareholders of quoted companies greater control over directors’ pay - which we covered in this post - the Financial Reporting Council has announced that it will consult on remuneration-related changes to the UK Corporate Governance Code once the Government’s legislation is in place:
“The FRC will consult on two proposals that the Government has asked it to consider: to extend the Code’s existing provisions on claw-back arrangements, and to limit the practice of executive directors sitting on the remuneration committees of other companies. It will also seek views on whether companies should engage with shareholders and report to the market in the event that they fail to obtain at least a substantial majority in support of a resolution on remuneration.”
See also: A single figure for directors’ pay? FRC Financial Reporting Lab report
Changes to the UK Corporate Governance Code, Stewardship Code and Auditing Standards: FRC starts consultation
Posted in Companies Act 2006 and company law, Consultations, Corporate governance, Directors, Equity capital markets, Regulators |
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21 June 2012
The Government yesterday published its finalised plans for giving shareholders in quoted companies* control over directors’ remuneration. The Department of Business, Innovation and Skills press release is here and its “Statement of government policy” is here.
BIS describes its proposed reforms as “the most comprehensive reforms of the framework for directors’ remuneration in a decade”. The reforms will be effected through the Enterprise and Regulatory Reform Bill. What BIS describes as “simplified” regulations setting out how companies must report directors’ pay will be published and consulted on. The government’s plan is that all these reforms will be enacted by October 2013.
Pay reforms: Government intentions
read more »
Posted in Companies Act 2006 and company law, Corporate governance, Directors, Equity capital markets, UK government |
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21 June 2012
The Insolvency Service yesterday withdrew its action against former directors of Farepak Food & Gifts Limited (Farepak) and its parent company European Home Retail Group PLC.
The application for disqualification orders against the directors was in progress at the High Court. It was withdrawn following the judge’s questioning of whether the action should continue in the light of, amongst other matters, the reported actions of HBOS in refusing to place Farepak customers’ money into a separate trust account prior to Farepak’s collapse. If HBOS did refuse to do that, it would have meant that more cash was available to meet creditors’ claims. HBOS was a major creditor.
The Daily Telegraph’s report of the ending of the disqualification action is here and the Mail’s is here.
UPDATE 6 July 2012: Lloyds Banking Group to make £8 million ex-gratia payment to former Farepak customers
See also: Farepak: what the judge said
Business Secretary Vince Cable has referred HBOS, now part of Lloyds Banking Group, to the FSA after his prosecution of the Farepak directors collapsed last week. In a statement Mr Cable also said he would also be contacting HBOS to establish how they would respond to calls for the bank to pay more into the Farepak creditors’ compensation fund – Daily Telegraph
Disqualification action against former Farepak directors to start on 24 May
Farepak liquidation: Advisers’ fees exceed total creditor payout
Insolvency Service applies for disqualification order against former President of the CBI
Posted in Companies Act 2006 and company law, Directors |
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19 June 2012
With the European Commission consulting on introducing legislative measures to increase the number of women on company boards, the House of Lords EU Sub Committee on Internal Market, Infrastructure and Employment has launched an inquiry into “Gender balance in the boardroom – is there a role for the EU?“
The House of Lords inquiry will consider:
- “Is gender imbalance on company boards an EU issue, or should it be a matter for national governments?
- What is the case for gender diversity on boards? Does it bring economic benefits, does it benefit corporate culture, or is it simply the right thing to do?
- Are quotas the only option? What other measures could the EU employ?
- Can or should gender diversity be incentivised?
- What are the positive and negative effects of legislative quotas?
- What impact have quotas had elsewhere in Europe?
- What does success look like in this area?”
The inquiry call for evidence is here. The deadline for submitting written evidence is Tuesday 10 July.
See also: Women on boards: one year on from the Davies Review
Posted in Consultations, Corporate governance, Directors |
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12 June 2012
The Companies Act 2006 introduced a new procedure by which a private company limited by shares can reduce its share capital by means of a solvency statement made by the directors. The procedure is set out in sections 642 to 644 of the 2006 Act.
The ICAEW has published useful short guidance on how to comply with some of these statutory requirements. That guidance appears to be no longer available for public access online, but this short note from Mayer Brown captures its main points.
The Company Law Committee of the Law Society published a memorandum in October 2008 on practical steps that directors can take before making a solvency statement, which can be read here.
See also: ICAEW legal and regulatory technical releases
Posted in Companies Act 2006 and company law, Directors |
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24 May 2012
The Enterprise and Regulatory Reform Bill was published yesterday and contained within it at section 57 is confirmation that the Bill will start the process of giving shareholders of quoted companies a binding vote on directors’ remuneration.
read more »
Posted in Companies Act 2006 and company law, Corporate governance, Directors, UK government |
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18 May 2012
Back in February 2011 we covered the decision of the Insolvency Service to apply to the High Court, on behalf of the Secretary of State for Business, Innovation and Skills, for disqualification orders to be made against nine individuals in relation to their conduct as directors of European Home Retail Group PLC and/or Farepak Food & Gifts Limited (Farepak).
The trial has now been scheduled to start on 24 May.
read more »
Posted in Companies Act 2006 and company law, Directors |
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16 May 2012
The Financial Times reports today that Michel Barnier, the European Commissioner for the Internal Market and Services, will propose that shareholders should get a binding vote on directors’ pay in quoted companies when he makes his final recommendations on corporate governance in listed companies in autumn 2012.
For the UK, the suggestion simply replicates the Government’s own proposals for a binding vote confirmed in the May 2012 Queen’s Speech.
In his interview with the FT, Mr Barnier also suggests that:
read more »
Posted in Companies Act 2006 and company law, Corporate governance, Directors, Equity capital markets, Europe, Financial services and market conduct, Regulators |
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15 May 2012
The CFO of Francesca’s Holding Corp. has been removed after using Facebook and Twitter to disclose potentially price sensitive information. Apparently he thought he was being amusing.
The CEO of Best Buy left just before it emerged that the company had been investigating his “intense” relationship with a junior employee. Now the cover-up has caused the Chairman to go as well. (The Daily Mail gets to the heart of the matter in its inimitable style.)
And the CEO of Yahoo left after a hedge fund pointed out that his CV claimed he had a degree he hadn’t got.
Posted in Corporate governance, Directors, Risk management, United States |
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14 May 2012
The CEO of Yahoo has left the company with immediate effect, after a hedge fund found material inaccuracies in his CV. He hardly gets a mention in the press release announcing his departure.
Posted in Corporate governance, Directors, United States |
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6 May 2012
Oh dear…he said (and repeatedly filed at the SEC) that he has a degree in “accounting and computer science” – very useful if you want to run Yahoo. However, a hedge fund agitating for change and board seats at Yahoo has found out that it is actually only an accounting degree. Less useful. The fund is calling for the CEO, Scott Thompson, to be fired by Monday 7 May.
UPDATE 8 May 2012: Mr Thompson has now apologised for the disruption caused by disclosure of his incorrect CV, if not for the incorrect CV itself.
UPDATE 14 May 2012: He has now left Yahoo.
Posted in Corporate governance, Directors, United States |
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3 May 2012
The advisory vote on the remuneration report at today’s AGM was lost by the insurer. It seems that institutional shareholders are to some extent pre-empting the results of the Government’s consultation on giving investors binding votes on executive pay.
Manifest, the proxy voting agency, reports that “only 12 other FTSE 100 companies have had more than 40% dissent on their remuneration report since records began” and that Aviva becomes only the fourth FTSE100 company to lose the advisory vote.
The chief executive of Trinity Mirror, Sly Bailey, has seen the writing on the wall and quit a week ahead of her AGM. Ms. Bailey managed to extract £12.7 million from the company whilst overseeing a 90% fall in the share price during her tenure.
UPDATE 8 May 2012: Following the shareholder vote against the remuneration report, the Chief Executive of Aviva has now resigned with immediate effect even though he personally was re-elected by 95% of those voting at the AGM on 4 May.
He gets a year’s salary “subject to mitigation” and £300,000 “in full and final settlement of all claims that he might have to bonus under his contract”, and pension, and vesting of shares from the 2009 bonus plan – but nothing from the deferred elements of the 2010 or 2011 bonus plans. Approximately £1.7 million, all taken together.
Posted in Companies Act 2006 and company law, Consultations, Corporate governance, Directors, Equity capital markets, Reporting and accounts |
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1 May 2012
The DCMS Select Committee has today published its report into phone hacking at News International. The Committee’s report finds that Rupert Murdoch exhibited “wilful blindness” (at paragraph 229) to what was going on in his companies, and lays the same charge also at James Murdoch:
“In failing to investigate properly, and by ignoring evidence of widespread wrongdoing, News International and its parent News Corporation exhibited wilful blindness, for which the companies’ directors—including Rupert Murdoch and James Murdoch—should ultimately be prepared to take responsibility…”. (Paragraph 275 of the report.)
It appears that Rupert and James Murdoch were both statutory directors of News International Limited (as it then was) during the phone hacking period.
The finding of “wilful blindness” by the DCMS Committee is not a judicial finding. If that finding was repeated by the court, it would suggest that these directors of News International had breached their duties as directors of the company, as set out in section 174 Companies Act 2006 (“a director of a company must exercise reasonable skill, care and diligence”) and also presumably section 172 (the duty to promote the success of the company).
Given that News International is a subsidiary of News Corporation, there is little prospect of a shareholder derivative action (under Part 11 of the Companies Act 2006) to confirm that the court would equate “wilful blindness” with breach of the section 174 duty to exercise reasonable skill, care and diligence.
Posted in Companies Act 2006 and company law, Directors |
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24 April 2012
In his last appearance as head of the FSA, Hector Sants discussed three questions:
• What do we mean when we say we want firms to have ‘effective boards’?
• What does this mean for the regulator’s Significant Influence Function process – often referred to as the ‘SIF’ process? And
• To what extent can the regulator incentivise the right behaviour and culture in firms?
read more »
Posted in Corporate governance, Directors, Financial services and market conduct, Regulators, Risk management |
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18 April 2012
A reminder of the very useful legal and regulatory technical releases of the ICAEW and available on their website, including:
- Tech 01/11 guidance for directors on accounting records under the Companies Act 2006
- Tech 02/10 and 01/09 on distributable profits
- Tech 06/08 on financial and accounting duties and responsibilities of directors.
There is also a useful financial services release on the preparation of section 166 reports and financial reporting release on the disclosure of auditor remuneration; and various audit releases (for example, access to working papers, and auditors’ duty of care to third parties).
Posted in Companies Act 2006 and company law, Directors, Financial services and market conduct, Lobby groups, Reporting and accounts |
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18 April 2012
A landmark moment in US corporate governance as Citigroup shareholders use their Dodd-Frank Act right to “say on pay” and vote against Citi’s executive compensation plan; see this comprehensive report by Reuters. The proxy advisory firms had advised a vote against the plan.
Posted in Corporate governance, Directors, United States |
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16 April 2012
Article by Steve Johnson in FTfm on 16 April 2012 on the measures used to calculate executive director bonuses. Discusses earnings per share, return on equity, return on capital.
Posted in Corporate governance, Directors, Equity capital markets |
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28 March 2012
2007 Annual Report and 2008 Rights Issue prospectus of Cattles plc contained highly misleading arrears, impairment and profit figures
read more »
Posted in Directors, Equity capital markets, Financial services and market conduct, Regulators, Reporting and accounts |
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26 March 2012
Gulf Keystone Petroleum’s cash settled scheme to incentivise the directors to sell the company
read more »
Posted in Companies Act 2006 and company law, Corporate governance, Directors, Equity capital markets, Takeovers |
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19 March 2012
“The opinions of FTSE 350 company secretaries on a wide range of business issues”
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Posted in Corporate governance, Directors, Equity capital markets, Europe, Lobby groups |
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14 March 2012
Consultation launched on the detail of the Government’s proposals on executive pay
read more »
Posted in Companies Act 2006 and company law, Consultations, Corporate governance, Directors, Reporting and accounts, UK government |
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13 March 2012
“Should current momentum be maintained, a record 26.7% female board representation in FTSE 100 companies would be achieved by 2015″
read more »
Posted in Corporate governance, Directors |
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5 March 2012
Justice Commissioner suggests quotas could be set at 20%, 30%, 40% or 60%
read more »
Posted in Consultations, Corporate governance, Directors, Europe |
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1 March 2012
European Round Table of Industrialists launches database of women candidates for directorships, and 23 European companies publish targets for promotion of women
read more »
Posted in Corporate governance, Directors, Europe, Lobby groups |
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29 February 2012
AIM company director buys shares a month before possible takeover announced – and three weeks after bidder first made indicative offer
read more »
Posted in Directors, Equity capital markets, Financial services and market conduct, Takeovers |
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20 February 2012
Technically not a clawback but a reduction in the number deferred shares to be awarded following the PPI debacle
read more »
Posted in Companies Act 2006 and company law, Corporate governance, Directors, Financial services and market conduct, Risk management |
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19 February 2012
Discussions and insights with leading audit committee members
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Posted in Corporate governance, Directors, Regulators, Reporting and accounts |
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30 January 2012
easyJet founder to Board: Feel free to go, you’re easy to replace
Sir Stelios Haji-Ioannou responds to threats by unnamed easyJet plc directors to resign if he votes down the remuneration report:
“These guys are welcome to resign anytime. I know as shareholders we could easily replace them with talented executives and experience non-executive directors who will cost half as much in bonuses. We must take a stand against directors who seem to regard our company as their personal piggy bank to be dipped into at will. The gravy train of £180m free shares issued over the last decade must come to an end now.”
See also: easyJet founder alleges that the board misled shareholders, did not obtain shareholder consent to a transaction and failed to issue a profit warning as soon as possible
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Posted in Corporate governance, Directors, Equity capital markets |
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27 January 2012
Serious Fraud Office publishes blockbuster guide to best-practice compliance
read more »
Posted in Companies Act 2006 and company law, Directors, Risk management |
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23 January 2012
- Listed companies to publish single pay figure for each executive director
- Pay and pay offs may be subject to shareholder vote; consultation to determine scope and type of vote
- Serving executives to be limited from other companies’ remuneration committees
- UK Corporate Governance Code to be amended to allow clawback of pay
- Remuneration reports to be split into “past pay” and “future pay” sections
The Business Secretary today set out in Parliament (ahead of a formal launch tomorrow) the Government’s plans for more transparency in, and greater shareholder control over, executive pay at listed companies. The principal measures announced in the Business Secretary’s speech are set out below.
UPDATE 25 January 2012: The Department for Business, Innovation and Skills has now published information about the Government’s proposals on its website.
read more »
Posted in Companies Act 2006 and company law, Consultations, Corporate governance, Directors, Reporting and accounts, UK government |
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19 January 2012
Heavily-indebted properties had declined in value by around £50 million since 2007
Stobart Group Limited (Stobart), the transport group with a Premium Listing on the London Stock Exchange, announced on 17 January 2012 that it is to purchase a property portfolio held in a company called WADI Properties Limited (WADI), for a consideration of £12.35 million, the assumption of £88.85 million of debt and a bank fee of £2.8 million– making a total enterprise value of £104 million.
Independent valuation less than price paid by Stobart
This WADI property portfolio had a gross market value of £98.93 million as at 30 November 2011 – some £5 million less than the enterprise value being paid by Stobart.
Vendors are Stobart’s CEO and COO
The vendor of WADI is a company controlled by the Stobart Chief Executive (Andrew Tinkler) and the Stobart Chief Operating Officer (William Stobart) . The Stobart Finance Director and the Stobart Deputy CEO are also directors of the vendor of WADI.
As Mr Tinkler and Mr Stobart are directors of Stobart
read more »
Posted in Companies Act 2006 and company law, Corporate governance, Directors, Equity capital markets, M+A |
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17 January 2012
Regulator’s update prompted by “the current economic uncertainties facing a number of countries around the world”
The Financial Reporting Council has today published “An update for directors of listed companies: Responding to increased country and currency risk in financial reports” (the Update).
The FRC has issued this Update to highlight significant issues that directors may address “when considering how best to provide a balanced and understandable assessment of a company’s position and prospects in the context of increased country and currency risk” in annual and half-yearly financial reports. The Update sets out various codes and regulations – including the UK Corporate Governance Code, the Listing Rules and IFRS – that may require a company to make these risk-based disclosures. The accompanying FRC press release is here.
The update specifically mentions the risks arising from regime change in the Middle East, the funding pressures on “certain European countries” and the curtailment of capital spending programmes, and sagely notes that the “outcome of these events remain uncertain”.
read more »
Posted in Directors, Equity capital markets, Europe, Regulators, Reporting and accounts, Risk management |
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