Sants calls for Companies Act overhaul
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FSA chief executive Hector Sants has called for the Companies Act to be overhauled to include a more explicit obligation to the wider society rather than focusing on shareholder value.
Speaking at the Chartered Institute of Securities and Investments conference this morning, Sants, who has revealed he will stay on in his role at the FSA as it is merged with the Bank of England, said the outcomes firms are seeking should be redesigned to better align them with the values of society as a whole.
He says: “This lack of alignment may well be the heart of the problem. I would thus strongly advocate intervention in the UK through changing the Companies Act framework for directors, for example.
“The current requirement for directors is to promote the success of the company. This is often interpreted in terms of shareholder value. Whilst this does include the need to have regard to the impact on the community, I do not believe that is sufficient.
“There must be a stronger and more explicit obligation to wider society. There must be clear recognition of the need for institutions to contribute to the common good.”
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Readers' comments (6)
Anonymous | 17 Jun 2010 1:55 pm
?!?!?....well rather than assume this is the rebirth of communism, i suppose its safer to say that i think that while the sentiment beyhind this is laudable, the delivery would be almost impossible to achieve without tying businesses up in inconceivable amounts of extra red tape, legislation, compliance....etc...oh, wait, maybe thats the agenda...?
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Phil Castle | 17 Jun 2010 2:33 pm
Anon above took teh words right out of my mouth. A laudable idea, but how could anything like that be good for the UK unless the amended rules were global? If not, companies will just move to a different jurisdiction.....
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Evan Owen | 17 Jun 2010 5:38 pm
The shareholders who benefit from reckless behaviour include the directors and officers, in banking that means rewards which can include more and more shares at a reduced rate and of course the big bad BONUS, does that not suggest that there is a conflict of interest which impacts upon the customer, or is it consumer?
There are a number of variations on a 'Company', some are formed with the intention of being of benefit to the community CICs for instance, why can't basic banks be forced to exist within such a framework?
There are lots of theories but what can we do in practice? Hector may be expressing his personal opinion, then again he may not be.
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lol | 17 Jun 2010 5:58 pm
good idea! why not just turn every enterprise into a state collective everything you earn, after all your hard work,could then be paid to the state, who can then use it for the common good, after awarding themselves a big fat salary with bonus, for having thought of such a wonderful idea in the first place.
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George Williamson | 17 Jun 2010 11:59 pm
Has anybody else heard the rumour that HECTOR SANTS is changing his name by Deed Poll to UNDER PANTS as a reflection of his performance at the FSA?
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Sean | 18 Jun 2010 8:05 am
Is he a socialist? The problem with this country is not too little legislation its too much. I am sure that if you checked there is probably sufficient legislation in place alreayd its just that there is a lack of political will to enforce it (as it would weaken UK plc).
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