Conservative Prime Minister Theresa May reiterated at the Conservative Party conference at the beginning of this month—among much else—her determination to go after big business when it misbehaves. A determination that was signaled with a series of corporate governance reforms set out in the opening speech of her campaign to become party leader. There is little doubt from the phraseology of her speech that she was referring to some specific scandals that have unfurled over the last few years: Sports Direct, the Panama Papers, Google/Starbucks/Amazon’s tax evasion, the growing gap between rich and poor. Yet, there are other, more radical proposals beyond making companies behave. In fact, much of the speech sounded like something you might expect to hear from a Labour Party leader, except for the constant lacing of jingoism.
Her first compliance and governance references came as she applauded the “spirit of citizenship.” “That spirit that means you respect the bonds and obligations that make our society work. That means a commitment to the men and women who live around you, who work for you, who buy the goods and services you sell. That spirit that means recognising the social contract that says you train up local young people before you take on cheap labour from overseas.” Yes, Sports Direct is the most flagrant example of hiring foreign workers at less than the minimum wage, yet the practice is widespread, extraordinarily, given the amount of regulations in place to prevent such practices. While it is a laudable aim, she offered little practical plans to implement such an aim. Simply enforcing current regulations—which will take considerable investment—would be enough, but she would need to commit to such investment. Sports Direct got away with its practices because there were not enough inspectors to detect them.
A director who takes out massive dividends while knowing that the company pension is about to go bust…. I’m putting you on warning. This can’t go on anymore.
Then she moved on to tax evasion: “That spirit that means you do as others do, and pay your fair share of tax. So if you’re a boss,” she continued, “who earns a fortune but doesn’t look after your staff ... An international company that treats tax laws as an optional extra ... A director who takes out massive dividends while knowing that the company pension is about to go bust ... I’m putting you on warning. This can’t go on anymore.” The targets here are pretty clear: BHS, US multinationals, the British banks complicit in the Panama Papers scandal—HSBC, Coutts, Rothschild, and maybe even the FA. But again, the laws and regulations that should prevent such behaviour are already in place, what is needed is the will and, even more importantly, the investment to enforce them.
Returning to a topic she first touched upon at the beginning of her campaign, May then turns to the criticism that boards are complicit in the misbehaviour of executives—something that was very clear at BHS and Sports Direct. “Too often the people who are supposed to hold big business accountable are drawn from the same, narrow social and professional circles as the executive team. And too often the scrutiny they provide is not good enough. A change has got to come.” At this point, she goes further than before: “So later this year we will publish our plans to have not just consumers represented on company boards, but workers as well.” Her first speech had alluded to worker representation and hinted at consumer representation, but now consumer representation would seem to be at the centre of her proposals. However, consumer representation is not a proposal that is widely supported either by industry, professional bodies, advisers,or any other related organisations; and many question how such an arrangement would work.
Her next target was workers’ rights: “That’s why we announced on Saturday [in her speech on Brexit] that we’re going to review our laws to make sure that, in our modern and flexible economy, people are properly protected at work.”
If you’re a tax-dodger, we’re coming after you.
And then tax evasion again: “If you’re a tax-dodger, we’re coming after you. If you’re an accountant, a financial adviser, or a middleman who helps people to avoid what they owe to society, we’re coming after you too ... So whoever you are you—however rich or powerful—you have a duty to pay your tax. And we’re going to make sure you do.”
Again this is all about enforcement. One of May’s promises in her Brexit speech was that all existing EU-based laws would remain intact even after Brexit. There are anti-tax evasion laws already in place in the EU and Britain, and more to come. Indeed, post Panama, the EU tax evasion website has been continually updated with laws being passed by the EU Parliament to try and combat this serious issue, including going after advisors as noted by May. Sovereign Britain, as May said on the opening day of the conference, is about to start making laws in Westminster, not Brussels; but does this mean it will take the EU’s laws, if they are good ones, and copy them for the U.K., or will Westminster simply be reinventing the wheel and spending time, time that might best have been spent implementing policy, coming up with fundamentally the same regulations on its own?
Continue the conversation at Compliance Week Europe: 7-8 November at the Crowne Plaza Brussels. Join us as we look at changes in global anti-corruption regulations, slave labour risks in your supply chain, and how to detect fraud, to name just a few topics. Learn more