Incoming chair of UK accounting watchdog commits to shake-up within months
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The incoming chair of the Financial Reporting Council on Tuesday pledged to overhaul the UK accounting regulator within three months, telling MPs that its governance was “not good enough”.
City veteran Sir Jan du Plessis was nominated in December by the government to lead the FRC, which has been without a permanent chair since May 2020 when former Goldman Sachs banker Simon Dingemans quit to take a job in private equity.
“The governance situation at the FRC is in a pretty poor state,” du Plessis told the House of Commons business select committee, which must rubber-stamp his appointment before he can take office.
“They haven’t had a permanent chair for goodness knows how long. They’ve got [only] three non-executive directors. It’s really, really not a way to run the regulator that should be setting the tone for the whole of British business,” he said.
Du Plessis, a former chair of BT and miner Rio Tinto, said the FRC had made progress under chief executive Sir Jon Thompson but promised he would tackle the governance problems immediately.
The board has been depleted by a string of exits and retirements since Dingemans’ departure.
“I think that within two or three months we’ll have an organisation that is much better equipped to make decisions and to present itself to external stakeholders as being in a good shape,” he said, adding that he expected the government to appoint more directors to the FRC’s board shortly.
The FRC, branded a “ramshackle house” in a review by former Treasury official Sir John Kingman in 2018, has been criticised for failing to prevent corporate scandals, including those at outsourcer Carillion and café chain Patisserie Valerie. It is set to be replaced by the Audit, Reporting and Governance Authority (Arga), a new regulator with greater powers.
Du Plessis refused to comment on the timing of legislation to create Arga and implement other long-delayed reforms of UK audit and corporate governance rules.
The South African and British dual national warned auditors to co-operate with the regulator as it aimed to overhaul the sector. “I hope they realise that, unless they play their part in creating a different regime, the outcome could be much worse for them.”
However, du Plessis signalled that he would focus on company management, who he said were responsible in the first instance when things went wrong.
“Yes, the auditor should have picked it up but we cannot just look at the audit profession and expect them to provide the answers if we are going to . . . try and avoid these scandals in future,” he said.
High-profile cases such as the collapse of travel company Thomas Cook in 2019 “reflect badly on board, management and on the audit”, du Plessis added.
Du Plessis said he had made mistakes during his career, including the acquisition in 2009 of HBOS by Lloyds TSB, where he was a non-executive director. “If you’ve been a warrior for a long time, you do get involved in situations at times where you shouldn’t.”
Asked about a fine imposed in Canada on tobacco company Rothmans for its part in a cigarette-smuggling scandal while he was chief finance officer, du Plessis said the “standards and expectations have, thankfully, been stepped up over the years” and that boards should be aware of such issues within their companies.