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ALEX BRUMMER: Bad Governance Prevents Britain’s Covid Recovery

ALEX BRUMMER: Bad corporate governance is hampering recovery from Covid in the UK


British companies step on the narrow line between good governance and promoting the vibrancy of the city after Brexit.

The dangers of ignoring governance were evident in The Hut Group (THG), which was hit by a disastrous stock price collapse from its peak of 807p in September 2021 to just 182.9p in its latest trading. ..

Others suffering from governance deficits include online fashion group Boohoo. Boohoo thought it needed to bring in former High Court judge Brian Leveson to monitor supply chain reforms.

In general, investors are often willing to look at weak governance when earnings and dividends are strongly offered.

Until that becomes clear, accounting is less robust than it should be and has suspicious behavior.

In many respects, Britain’s strict governance system should be beneficial to the city.

However, the Financial Reporting Council (FRC), the enforcer of better governance, states that transparency requires more than a rough declaration.

Among the serious shortcomings are weak goals for executive compensation. An example is a potential £ 100m bonus to Mike Ashley’s future son-in-law, Michael Murray, at Frasers Group.

It is based solely on the stock price, not the values ​​or objectives of the Sports Direct owner. The FRC also found that there was no focus on internal control and risk management.

Among the myriad difficulties of Matt Molding at THG is the conflict between his personal role as the landlord of the company and the interests of being its controlling shareholder.

He has previously shown that he cannot provide skeptical investors with clarity on how the revenue of its technology platform Ingenuity is calculated.

Another area the FRC wants to strengthen after Covid is reporting on a company’s broader responsibilities (specified in city and corporate law) on a variety of stakeholder, economic and social issues.

The main reason for opposition to the quoted company’s acquisition of private equity is that what new owners do, good or bad, is primarily behind high walls.

If the cited companies engage in best-in-class reports on all these issues and climate change, the interests of consumers, colleagues, suppliers, taxpayers, and society in general will be much better protected.

That way, if the battalion’s battalion investors can bother themselves, their advisors, and the executors, it’s much easier to keep the buyer’s feet out of the fire.

Currently, there are unplanned systems that can easily avoid rather nonsensical promises, such as maintaining headquarters in the UK or the region, along with job guarantees.

There are no formal criteria for determining these issues, so social impacts are rarely investigated.

FRC is strengthening surveillance. How good would it be if the distraught house had the full power of law in the form of proposed audits, reports and governing bodies.

Dull light bulb

When it comes to the UK energy market, you need to be careful about what you want. The Theresa May government has capped energy prices in response to similar previous ideas from then-Labor leader Edward Miliband.

The idea was to limit consumer exposure to wholesale market volatility.

The cap is now causing havoc. Prices may be temporarily fixed by caps, but choices are disappearing in front of us.

Minnow Orbit and Entic have joined the escape following burnout at the valve and are currently backed by a £ 1.7 billion taxpayer loan.

This could have been avoided if politicians had received the personal advice of regulator Ofcom officials who wanted to adjust their sliding caps monthly or quarterly in response to changes in wholesale prices. there is. This will ease the pressure on weakly capitalized players.

The current danger is to return to the status quo, where the Big 6 will once again dominate the market and destroy choices.

German inquiry

Be more careful with the London Stock Exchange. Frankfurt-based rival Deutsche Boerse is enlivening the game by extending business hours to 10 pm local time as it closes the Wall Street bell.

After the London and Continental exchanges are closed, professional investors will have access to alternative trading platforms. This is not an easy luxury for global retail investors with growing interest in the stock market.

Bold thinking.

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ALEX BRUMMER: Bad Governance Prevents Britain’s Covid Recovery

Source link ALEX BRUMMER: Bad Governance Prevents Britain’s Covid Recovery

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