Tory leadership: Conquer and divide?
The UK’s Conservative Party could learn a lot from the way top accountancy firms elect their leaders, according to one academic.
The fight for leadership is now down to two contenders—Rishi Sunak and Liz Truss. But the vast field of hopefuls at the beginning of the contest is reminiscent of many elections in professional services firms, says Laura Empson, a professor at London’s Bayes Business School.
“When a large number of potential candidates emerges,” says Prof Empson, “it is a sign that an organisation needs a change in direction. While a highly contested election may run the risk of being divisive, and descending into civil war, it is also an opportunity to take stock and reset direction.”
She adds poignantly: “For the partnership to remain cohesive, the winning candidate will need to win the approval of defeated candidates’ supporters, and one way of doing this is to ensure that their dignity is preserved.” No sign of that at the moment.
Talking of which…
Just picking up the election theme, KPMG in the United Arab Emirates has announced it will rerun its leadership election after the Financial Times published complaints about leadership and partner infighting.
There were also concerns, according to the FT, about partners receiving little notice of a vote to re-elect the current chief executive and, subsequently, no opposition. A lot of dignity may be needed to ease wounds in KPMG’s UEA office.
GT fined after Sports Direct audit
Audit firm Grant Thornton has been fined £1.3m for work at retail chain Sports Direct from 2016 to 2018. The fine is comprised of £1.13m for the 2016 audit and a further £193,000 for 2018.
GT will also have to report to regulators on whether changes to the way it conducts audits are working, and undertake “thematic reviews” of its work.
The Financial Reporting Council also imposed a “severe reprimand”.
Grant Thornton partner Philip Westerman is fined £63,000 (reduced from £90,000 for early admission) for 2016 and a further £16,575 for 2018.
One key complaint against GT was that the firm failed to check whether a delivery company “was not a related party”, even after related parties had been identified as significant risk. The firm also obtained “insufficient” evidence for the 2016 audit. Red card for GT.
Norwegian capital
Researchers in Norway have found that “below the top” executives—those not required by law to discloses transactions in their own company’s shares—make “substantial abnormal returns on purchases in their own-company stock”.
The team found no abnormal returns on trades by top execs and directors not required to disclose their deals.
Hans Hvide and Kasper Meisner Nielsen , who looked at the Norwegian firms, conclude: “Our study provides evidence of the frequency and the returns on insider trading by individuals who are ‘just’ below the threshold to be considered primary insiders.
“These results are informative for regulators, market participants and the debate about whether a wider group of company employees should be considered primary insiders.”
There you go: Sometimes it pays to be outside the jet set.
Virtually an AGM
Uncertain about your AGM and how to run it? Well, the Financial Reporting Council (FRC) has some handy advice and a friendly warning.
Most of the advice is focused on how to best use the virtual world to host an AGM, rather than cram your shareholders into a tiny venue, with the prawn sandwiches already beginning to turn.
Sir Jon Thompson, chief executive of the FRC, said: “With this new guidance, we want to encourage companies to seize the opportunity to maximise shareholder engagement embracing new technologies.”
But he raises a flag. “We also recognise that that there are many benefits of physical meetings, allowing for more effective in-person dialogue, so companies should think carefully about which approach is right for them and their shareholders.” The virtual world should not be a hiding place.
Opening up on the environment
Environmental disclosures are the fastest growing group of ESG disclosures to watchdogs by US companies.
A survey by law firm White & Case finds companies are disclosing sustainability investments, recycling and renewable energy use. Of filings to the SEC so far, 89 have increased environmental disclosures in 2022, compared with 35 in 2021. The increases comes as the SEC works through the process of introducing mandatory climate-change disclosures.
“The fact that every company surveyed included environmental disclosures either in their Form 10-K or in their proxy statement,” White & Case writes, “and that so many companies that already had robust environmental disclosure increased that disclosure in 2022, illustrates the significant focus on environmental issues in 2022.”
Glad that’s clear.
Diversity at Amazon
Amazon appears to be facing some tricky decisions in its boardroom. Forbes reports that the departure of Alicia Boler Davis and David Bozeman leaves the board without black leaders in its senior team.
Amazon chief executive Andy Jassy is reported to have written in an email to staff that it is “not lost on any of us that we’re losing two of our most senior black leaders”.
Jassy may want to think about his talent pipeline.