FSA Announces Appointment of Senior Advisers on Governance & Authorisation

by Karl Hindle - London, UK

The FSA announced the appointment of five senior advisers on governance and competency late last month.  In the hurly burly of the politically driven financial news, this "minor" piece has slipped by the radar of many observers, but when a list of names which reads as the "Who's Who" of corporate governance is retained by the largest financial regulator in the UK, it demands more than passing attention to what is going on.

At the same time as the announcement on the appointments, the FSA issued a statement on the release of the Walker Review on corporate governance in UK banks and financial institutions - one of the recommendations is the focus upon corporate governance and the FSA has clearly picked this up as one to focus upon. 

Hector Sants, FSA Chief Executive, announced the appointment of Sir Dominic Cadbury, Baroness Hogg, Lord Marshall, Sir Brian Pitman and Sir David Scholey, amidst changes to the individual fitness regime as applies to providing authorisations.  Sants said:

"These new advisers have extensive experience acting on boards of major companies and in senior policy positions and will bring valuable insight to the work the FSA is pursuing on governance.

In adding this board expertise to our SIF interview panel, we can continue to ensure those taking up top jobs are the right calibre to lead and challenge the management of the UK's top firms."

 The new appointees will sit upon the SIF panels for interviewing the proposed candidates for senior authorised positions in the largest of the UK's financial companies.  While these advisers will have input in the interview and can forward recommendations, they have no veto on the appointment and the FSA panel makes the final decision.

Any candidate for the board chair, chief executive, senior independent director and the chair of the audit, risk and remuneration committee will be subject to the scrutiny of at least one of the new appointees.

The appointees represent a very heavy bias towards experience and expertise in the corporate governance field, and this represents a new front for the FSA.  The FSA has previously stated it would start focusing on corporate governance in the past, but as this has been the purview of the Financial Reporting Council, an organisation with little in the way of sanctioning authority, it represents a further mechanism for the FSA to control financial firms.  

If a specific violation cannot be demonstrated by the FSA, it will be simpler for them to demonstrate a cavalier attitude, or wanton disregard, for the extremely widely drafted Combined Code on Corporate Governance.  Perhaps this is running ahead, but the scope for firms to now be scrutinised for failing to establish appropriate corporate governance policies and controls, particularly as applies to say, risk management, is a huge leap closer to reality.

Baroness Hogg is deputy chair of the Financial Reporting Council (tasked with the Combined Code on Corporate Governance and the promulgation of a Stewardship Code for relations between institutional investors and companies); Sir Dominic Cadbury hails from a line of Cadbury executives with strong influence on the UK's development of corporate governance policy (Cadbury is also a former Misys non-executive director); Sir David Scholey is a former member of the Board of Banking Supervision and also Court of the Bank of England; Sir Brian Pitman is a former Chief Executive of Lloyds TSB; and Lord Marshall is a former non-executive director of Nomura.

All the appointees are due to commence their duties January, 2010.

The FSA appointment announcement can be found here.

The FSA statement on the Walker Report can be found here.