Tough gig

Dual-class shares are the issue that will not go away. Earlier this year, the Financial Conduct Authority, with the blessing of newly anointed chancellor Rachel Reeves, softened the rules for dual-class shares, making them much easier to adopt.

Cue much gnashing of teeth from shareholder groups who steadfastly believe in one share, one vote.

Others think the shares will bring more pragmatic problems. On the letters page of the Financial Times this week, Barry Gamble, boardroom veteran and chair of The NED City Debates programme, argued they will make life very hard for non-execs.

Dual-class shares are, of course, very popular with the leaders of global tech giants who like to maintain a tight grip on their companies. Gamble’s point is that they are “surely corporate governance outliers”.

“To be effective, the board must demonstrably function as the agent for all shareholders. This requires non-executive directors to instil a culture of constructive challenge and scrutiny to the board’s business,” says Gamble.

“The limits to the non-executive director’s freedom to act as such will quickly be apparent if the founder director shareholder holds extra voting rights through a dual-class share structure.”

Where dual-class shares are part of the governance landscape, non-execs will find themselves with a “tough gig”, Gamble adds. Thoughts and prayers.

Fantastic foundations

The trials of KPMG, the Big Four audit firm, have been well documented. It was the auditor of collapsed construction giant Carillion when it went bust in 2018, prompting a major reform of auditing in the UK that, even now, has yet to reach a conclusion.

KPMG’s role was, however, brought to public notice. A year ago, regulators fined the UK firm £26.5m (discounted to £18.5m) for failures in Carillion’s audit. KPMG staff also faced their own fines over the failure.

This week, Jon Holt, the firm’s managing partner, reflected on his time leading KPMG since 2021. “We’ve laid the foundations for a successful future,” he tells the Financial Times.

“My aim for the next five years is for people to look at the firm and say, ‘We’re in a fantastic place.’ And that my years of stewardship have been a success.”

After all the controversy, he expects the firm’s global profitability to rise and growth to be in line with competitors. Is KPMG impervious to scandal? Who knows. But it turns out the firm is nothing if not resilient.

Gensler goes

The first governance casualty of the second Trump era emerged this week after Gary Gensler, chair of US financial watchdog the Securities and Exchange Commission (SEC), said he would step down in the new year.

Gensler has overseen much change at the SEC, including a crackdown on cryptocurrencies. He has, however, become something of a bête noire for MAGA-era Republicans who believe regulation should be minimal.

Gensler tightened the limits for when corporate insiders can sell their shares and introduced “clawback” rules for executive pay and additional remuneration disclosures. Other reforms allowed shareholders to vote for their preferred boardroom candidates.

But opponents were especially enraged by Gensler’s attempt to introduce mandatory climate risk reporting for US-listed companies, which they argued was regulatory overreach.

The move would have brought the US in line with most of the rest of the world, but the effort was suspended after the proposals were challenged in US courts.

When Trump becomes president, the rules will be killed off. Gensler said this week that leading the SEC had been “an honour of a lifetime”. His last day will be Trump’s first. A new era of US politics is coming, along with an about-turn in regulatory focus. Good luck, everyone.