Leading business figures raised concerns on Monday that proposals to hold senior directors accountable if things went wrong under their watch could deter would-be talent from joining boards.
The Bank of England announced proposals last July for a code for senior bankers and insurers that would sanction, even jail, executives when things went wrong while they held their positions.
Andrew Bailey, head of the BoE’s Prudential Regulation Authority, wrote this week that the chairman, senior independent director and respective heads of major board committees should also be subject to the rules.
Sir Roger Carr, chairman of BAE Systems, told the Global Law Summit, a legal conference set up to mark 800 years of legal history since the Magna Carta declaration was signed, that the regime could deter an individual who thought they could add value as a board director.
“If you see yourself going to jail for something that happened outside the line of sight, you would think long and hard before taking that job,” he said.
The plans could mean boards end up being “not balanced” and filled with “only those with technical knowledge”, he added.
His concerns were echoed by Rosemary Martin, group general counsel and company secretary of Vodafone, who called them “extraordinary proposals”.
“We might end up with tiny boards and large advisory boards, and you have the question of shadow directorships,” she told the conference. She later told the FT that one concern was that the “stringent regime” holding directors to account could be adopted by other large companies outside the financial services sector.
The business leaders were among those speaking on the rule of law at the Global Law Summit in London, an event that has attracted about 2,000 lawyers and business leaders from around the world.
The summit pays tribute to the Magna Carta — the great charter — that is regarded as the most important document in English history. Signed at Runnymede in Surrey in June 1215, it limited the power of King John and enshrined rights to citizens such as a fair trial by jury.
Eric Holder, the outgoing US attorney-general, who was among those who addressed the conference on Monday on the “enduring importance” of Magna Carta. He described it as “not just a legal document” but “a potent symbol of freedom under the rule of law”.
Democratic values and open societies “must be continuously protected against intolerance, extremism and hate,” he said.
“The events now unfolding in Syria and Iraq remind us every day that we cannot afford to be passive in the face of violent extremism, however it is cloaked. It is clear that we must address those underlying causes that tend to breed this mindless desire to join a cause that is in the truest sense of the word barbaric and antithetical to all that we celebrate today.” he said.
Rise in court fees seen as contrary to Magna Carta principles
The Global Law Summit has met with controversy from lawyers who claim that government cuts to legal aid are undermining access to justice.
Justice Alliance, a campaign group, organised a walk from Runnymede to Westminster where they protested against the high-profile event on Monday.
The Law Society also chose the start of the summit to begin its legal action over the government’s decision to increase some court fees by up to 600 per cent. Part of its challenge includes claims that the proposals would be tantamount to “selling justice”, contrary to the principles of Magna Carta.
Chris Grayling, lord chancellor, who has been criticised by some lawyers for his decisions to cut legal aid, told the conference that the legal sector contributed more than £20bn to the UK’s GDP and employed more than 300,000 people.
“In London, we have a centre of legal excellence that is rival to any other great city in the world. I would like it to stay that way,” he said adding that the history of the UK legal system showed that “no change is seldom an option”.
Lord Green, former chairman of HSBC, had been due to speak in his capacity as chairman of the TheCityUK but he resigned from the business group last week following the HSBC tax controversy.
Other speakers included Karim Massimov, prime minister of Kazakhstan who spoke on the reform programme being undertaken as the country seeks to become a full member of the OECD.
Later in the week the conference will include speeches on business, rights and the global economy. Among the speakers will be Cherie Booth, QC, wife of Tony Blair, and politicians including Boris Johnson, mayor of London.