Vince Cable: Crackdown on Directors of Failed U.K. Firms

by: Aneta Dyakova There has been an increased focus of the Department for Business, Innovation and Skills (BIS) on amending the statutory duties of directors in key sectors such as banking. This has been provoked by the Parliamentary Commission on Banking Standards' recommendation that directors of banks should have a "primary responsibility" to ensure the safety and stability of their firms. <1=">1</a>"> Indeed, public confidence has been dented, especially after a series of banking scandals, encompassing the former chief executive of RBS, Fred Goodwin, leading the bank to a near-collapse in 2008 and a subsequent multi-billion-pound government bailout, as well as Farepak scandal and nursing homes. Certainly, there is a clear need for new measures in an attempt to restore public confidence and promote a fairer and valuable economy for everyone. Therefore, in his keynote speech to the Liberal Democrat conference, the U.K. Business Secretary Vince Cable will announce measures to tighten laws on reckless company directors, making it easier to ban them from future board-level roles and for their victims to sue them for compensation. <2=">2</a>"> In other words, strict reforms should be imposed in order to prevent rogue directors, including bankers, from still being key players and directors at any other British companies. This is an initiative which addresses high priority issues and is expected to enhance company performance in the long-term, since decisions that affect the lives of employees and business deals will not be any more in the hands of rogue directors. To crack down on rogue directors, Cable outlines some key measures that involve a better compensation scheme for people who have suffered losses from directors guilty of criminal or reckless behaviour; ensuring that directors banned from companies abroad are not allowed to run companies in Britain; extending the time to investigate complex cases of alleged misconduct by company directors to ensure they cannot be "timed out"; raising standards of behaviour by introducing special corporate training. <3=">3</a>"> Mr Cable will also announce a consultation on “zero-hours” contracts, which allow employers to take on staff without guaranteeing them a minimum amount of work. In his attempt, he will suggest moves to increase transparency about corporate ownership, to make money-laundering and tax evasion harder. Cable’s measures on company directors are expected to be included in the final Queen's speech before the 2015 general election which will be unveiled in the spring next year. <1>http://www.bbc.co.uk/news/business-23306086 <2>http://www.bloomberg.com/news/2013-09-15/cable-pledges-crackdown-on-directors-of-failed-u-k-companies.html <3>http://www.theguardian.com/politics/2013/sep/16/vince-cable-getstough-on-dodgy-directors Aneta Dyakova is a Research volunteer at Tomorrow’s Company with a completed MSc degree in Development Economics from SOAS, University of London. She previously worked as a part-time research assistant at SOAS where she co-authored three research articles on emerging stock markets which were published in international journals.