Cheese wedge or banana split?
Those of you with a finely honed sense of the silly season will have noticed the on-again-off-again saga of EY’s separation making its way back to news pages.
To recap, last year it emerged that EY was considering partition—splitting consulting from all other services—as a response to regulatory enthusiasm nearly everywhere for more emphatic auditor independence. The speculation finally ended in April this year, when it turned out no one could agree on how the split would work.
Fast forward to this summer and stories that TPG Capital, a listed asset manager, has approached EY about buying its consulting business with a view to possibly listing it at some point in the future. So, another effort at amicable divorce. Though with some outside help, on this occassion, like a marriage counsellor that falls for one of its clients.
However, it now seems EY has rejected that idea, with the FT citing the firm saying it was “not actively engaging in any transactions”. So it’s all off again and the saga of your favourite auditor and its future continues. Though, on some reflection, it’s worth noting that “not actively engaging” leaves plenty of wiggle room.
Cash for questioning
Now to some key facts and trends from the FRC on audit and auditors (no, don’t yawn). Seems these have been good times for the Big Four: total fee income increased 11.9% in 2022, more than double the rate of growth on the previous 12 months.
Audit firms outside the Big Four have done even better with growth of 18.5%.
Now, whoever said audit doesn’t pay? No one, ever.
Time for T
Now, non-execs, what shape do you think you’re in? We know, you’ve all indulged a little too much while in the Maldives or Skegness, so some of you may be a little more pear-shaped, some a bit more rotund (we share your pain, BTW).
But no, that’s not what you’re supposed to be. You’re supposed to be T-shaped! Let us explain.
A paper from those headhunters at Russell Reynolds, posted on the vaunted Harvard Law School governance blog, argues for a T-shape in the ideal non-executive—expertise in “one domain”, the vertical stroke of the T, while also being able to “engage” across the board agenda (yes, you’ve guessed it): the horizontal stroke of the T.
To be perfectly honest, at this point in the summer we expect most people to be just horizontal. Which is no bad thing.
Now to the good burghers of Uxbridge and their decision to vote for a Tory MP in a recent by-election, because London’s Labour mayor Sadiq Khan is pushing ahead with expansion of the City’s ULEZ (ultra low emission zone). Uxbridge voters didn’t like the idea that their Chelsea tractors might face extra charges.
Apparently, this may all be a sign that the UK is descending into the same morass currently afflicting US politics over ESG and climate measures. The FT reports that Nicolai Tangen, chief executive of Norway’s massive sovereign wealth fund Norges Bank Investment Management, referred to the Uxbridge vote: “That’s bad. You have a big country in Europe that is slowing down the work on climate at a time when it’s more important than ever.”
Nice observation from a corp gov aficionado like Tangen. “To me,” Tangen told the FT, “climate is about as political as gravity.” Nicely put. Let’s hope the penny, or rather the message, drops for UK politicians.
Fortunately companies tend to be responding to that message, particularly when it comes from investment managers such as Tangen.
In the US, where the anti-ESG movement is much more vociferous, many companies are dishing up data in response to demand for climate-risk related info.
A survey from Persefoni and the Society for Corporate Governance reveals 90% of companies have established controls and procedures to “track, monitor, aggregate and report climate and environmental metrics”. And 90% say they do it voluntarily.
There may be a lot of anti-ESG noise, but companies are quietly getting on with making ESG a part of their policies. Fortunately, most investors don’t live in Uxbridge. And hopefully more than a few drive a Prius (other EVs are available).