Blog : BOARD TALK
|Posted on October 28, 2015 at 1:30 AM|
Guy Jubb , the corporate governance champion who has a strong reputation for leading the charge in Europe for better, more active, shareholder engagement, will today call for a redefinition of businesses regarded as 'public interest entities' in the European Union in the pursuit of better governance.
Guy Jubb, Global Head of Governance And Stewardship, Standard Life Investments
Currently under EU law, all companies incorporated in an EU member state - including the subsidiaries of non-EU parents - with debt and/or equity securities listed on a EU regulated market fall within the definition of 'public interest entities', irrespective of their size or the nature of their activies. As all the regulation coming from Brussels applies to all such entities, the burden of audit reform, corporate governance and transparency arrangements is the same for all listed companies.
He will call for a re-definition of 'public interest entities' in recognition that one size does not, after all, 'fit all.'
Mr Jubb honed his reputation in corporate governance as Global Head of Governance and Stewardship at Standard Life Investments, which he joined when it was created in 1998. The company recently announced he was to retire in March, when he will have been with the Group for 30 years.
Today, as a Scot, he will give the Chartered Institute of Management Accountants (CIMA) Presidential Conference in Edinburgh his thoughts on accounting for management - and delivering better governance.
"To my mind, public interest entities are those which have a meaningful impact on the general public – for example, major banks, utility companies, and major employers like Volkswagen. Consequently, to my mind, many listed companies - for example most companies listed in the FTSE 250 and smaller companies indices - are not public interest entities. Therefore I should welcome not only a re- definition of public interest entities by Brussels – let’s call them ‘significant public interest companies’ - but also the introduction of a new and separate category of companies – let’s call them ‘shareholder interest companies’ – for those companies that currently fall within the definition of public interest entities but would not meet the criteria for ‘significant public interest companies" he will say.
"A structural definitional shift to enable a more proportional approach to corporate governance, transparency and other related burdens would not only provide a public interest risk based framework for corporate reporting and governance standards in Europe but also send a strong political and economic message of encouragement to ‘shareholder interest companies’ to devote more of their scarce resources to generating economic growth and prosperity for their shareholders rather than complying with the more onerous public interest governance and transparency requirements. Redefining public interest entities should lead to a win-win scenario for all concerned" he will add.
Looking further down this route, he will say: "I could envisage ‘significant public interest entities’ having to comply with corporate governance laws that would require a specific reference to their duty of care of society and the public interest, not just to shareholders. This would inject a new authoritative and legally binding dimension into decision-taking - particularly long-term decision-taking – in Europe’s boardrooms."
Mr Jubb will also make a passionate case for the need to promote the Global Management Accounting Principles (GMAP) which were prepared by the American Institute of CPAs (AICPA) and CIMA. They were covered in this blog here.
And also covered on Forbes by yours truly. But clearly not enough of you are reading, and listening.
"I do not want to be unduly critical since I understand useful progress has been made on a number of fronts but I must confess that GMAP have been –and are - invisible from my seat of stewardship. I have never seen reference to them in corporate annual reports and I doubt many audit committee members know anything about them. In the wake of the Volkswagen scandal, CIMA and the AICPA have an excellent opportunity to promote GMAP and the four focussed outcomes. They should do so with a loud and influential voice – a voice that is heard not only throughout their memberships but also in boardrooms and the global investment community" Mr Jubb will say.
And because he is extremely good at the convincing (and tidily circular) argument, he will say that 'significant public interest companies' "should be required to disclose, on a comply or explain basis, whether or not they adopt GMAP in their organisation when benchmarking and improving their management accounting systems."
Note: This blog and those who care about corporate governance will miss Guy Jubb - but you have until March to contact him at Standard Life Investments - and fortunately, we clearly have not heard the last of him.