Get on with audit reform

Prime minister Liz Truss and newly appointed chancellor of the exchequer Kwasi Kwarteng have been told “progress’ is needed on corporate governance reform, especially the long process of overhauling audit.

In a letter to the new regime, Michael Izza, chief executive of accountancy body ICAEW, says the reform project needs a hurry up and is “too long overdue”. Reform proposals have, after all, seen the arrival and departure of two Tory PMs. It would be a shame if it waited long enough to see the departure of yet another.

Brum deal

Goodbye, London. The staff at the UK governance watchdog may be saying “So long”, after it was reported that the Financial Reporting Council will be relocating to Birmingham.

That’s not so bad. Shakespeare’s birthplace is just down the road, it’s the home of Peaky Blinders, and it’s got a symphony hall with a cracking orchestra. Still, staff may miss London and we sympathise. It’s not so convenient for London eateries for a City lunch. Though that may be the point.

Swap shop

The US ESG investing row continues apace. Republicans in the Senate are pursuing legislation that would force pension fund managers to invest based only on financial returns, not ESG considerations.

This week, however, Wall Street saw the launch of a new fund, the Point Bridge America First ETF with the ticker symbol “MAGA” (no prizes for guessing what it’s about).

The launch has caused eminent academics to warn those wanting laws to exclude ESG values from investment decisions to take care.

In a piece for the Harvard Law School governance blog, Robert Eccles, a professor at the University of Oxford, and Jill Fisch of the University of Pennsylvania, write: “Conservatives who complain that ESG investing is a way of forcing a social and environmental agenda on companies that has nothing to do with company profitability, perhaps even hurting it, need to look in the mirror if they are creating anti-ESG funds of their own. This is simply swapping out one set of values for another. Both are forms of socially responsible investing.”

Green committees take root

ESG looks to be embedding itself in governance—at least at the larger companies. According to PR firm Mattison, 54% of FTSE 100 members have now established ESG committees (100% in the oil and gas sectors).

Maria Hughes, a Mattison director, says FTSE 100 firms are “taking big steps” to address their responsibilities on ESG.

“If you are a FTSE 100 company without an ESG committee at board level, then you are now in a shrinking minority,” she says.

That’s all good: the process is looking great. Let’s hope they achieve the ESG outcomes we all need, especially those net zero emissions.

Stretching a point

BlackRock, the world’s largest fund manager, is airing some concern about “overboarding” among directors at tech companies, according to the Financial Times.

BlackRock has, according to reports, voted against the reappointment of directors at Salesforce, the cloud computing giant, as well as that of a director at Twitter.

Overboarding, as we know well, is the term given to directors considered to have too many posts in their portfolios. Spreading themselves a little thin is a perennial complaint about non-executives in some quarters. However, given the shortage of people with tech experience, it is no surprise that some experts are oversubscribed.

EPS test

Rules for reporting “earnings per share” (EPS), a cornerstone metric for investors, are “not always understood or applied correctly” by companies, according to a review by the Financial Reporting Council. Given how widely used the measure is, that bit of eye-opening news may give some stock pickers reasons to take a sharp intake of breath.

Still, the FRC has some timely advice for accounting departments. Best to take note.

Risky business

Female chief risk officers in banks are prone to “higher risk-taking activities”, according to a team of academics from Sheffield University.

After looking at a group of 120 US banks, the study finds that female risk officers have a greater appetite for risk taking. However, it also finds the behaviour drops off in the presence of female boardroom members.

The investigators conclude: “Our results have implications for both regulators and corporate boards, showing that the appointment of a female risk office is not sufficient to reduce risk taking by banks.” One worth mulling.