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REGULATORY ARCHITECTURE TO ENHANCE DEMOCRACY AND BUSINESS ACCOUNTABILITY
Abstract and Figures
Numerous scandals have shown that the UK has an ineffective regulatory architecture populated by overlapping, uncoordinated and unaccountable bodies. This has resulted in duplication, waste and obfuscation as matters get shunted around from regulator to another. The UK has 41 regulators for the financial sector alone and at least 14 dealing with accounting, auditing, insolvency and some aspects of corporate governance. Even then there is no central enforcer of company law. There is little coordination to deal with corporate scandals, auditing failures, looting of pension schemes, insolvency abuses, tax avoidance, money laundering and general abuse of consumers and citizens.
This report puts forward a stakeholder model of regulation that is independent of government departments and puts citizens in a position to oversee regulatory effectiveness. It focuses on key areas of corporate and financial regulation, but the
general principles it proposes can and should be extended to many other areas in
which regulation has become central to business, the economy, and society as a
whole. It does not aim to increase the amount of regulation, but indeed to reduce it.
Regulation has too often produced bloated bureaucracies that are both
unaccountable and ineffective. The reforms would reduce duplication and waste and
increase effectiveness of the regulatory system and its accountability to the public
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Purpose
This paper aims to examine the stewardship practices of BlackRock, one of the world’s biggest index managers, to highlight a tension and contradictions associated with demonstrating sustainability leadership and its actual substance.
Design/methodology/approach
To support its argument, this paper draws on the author’s long-standing industry and academic experience, existing academic evidence and documentary analysis.
Findings
This paper reveals conflicting data, highlighting a tension between BlackRock’s commitment to environmental, social and governance (ESG) in its public statements and translating this commitment into tangible outcomes through voting, ESG investments and stewardship reporting, which seem to be more assumed than demonstrated.
Research limitations/implications
This viewpoint is based on a review of existing evidence. It offers some critique on current stewardship reporting practices, which has implications for management and policymakers. It identifies areas for future research in the area of stewardship and ESG reporting.
Practical implications
This paper highlights the need for a more critical interrogation of investor stewardship and ESG reporting and a more joined-up policy and regulatory approach to stewardship and sustainability reporting.
Social implications
Improving stewardship practices of asset managers will help enhance the social value created by the financial services sector.
Originality/value
In drawing on personal experience and existing literature, the originality lies in the combination of arguments brought together to highlight the challenges of making sense of the conflicting ESG reporting data to see how this may impact policies, regulation and future practices in the area of sustainability and ESG reporting.
The expectations gap is considered to be one of major issues confronting the accountancy profession. The users of corporate reports, investors, journalists, politicians and others expect auditors to detect and report material fraud and irregularities, amongst other things. In response, the profession argues that the public misunderstands the role of the auditor, and that fraud detection and reporting is not a major audit objective. Despite such divergence in views and beliefs, the profession appears to believe that the expectations gap can be eliminated. This paper locates auditing expectations debates within a social, political and historical framework. It is argued that, in a society marked by numerous social divisions, it is inevitable that the meaning of social practices, such as audits, is contested. Due to social conflict, the meaning of social practices is subject to continuous challenges and (re)negotiations and the gap between competing meanings of audit cannot be eliminated. We illustrate this interpretation through an examination of the association of audit with the detection and reporting of fraud. The historical evidence, we argue, suggests that audit objectives are constructed and transformed within social relations of power.
House of Lords Debates
- Hansard
Hansard, House of Lords Debates, 14 December 2006, col. 1712;
House of Commons Debates
- Hansard
Hansard, House of Commons Debates, 22 October 1992, cols 574-89
The bean counters deserve a roasting -it's time for the 'big four' accountants to be held to account
- Ruth Sunderland
Ruth Sunderland. The bean counters deserve a roasting -it's time for the 'big four'
accountants to be held to account, Mail on Sunday, 15 April 2018;
How to start an audit of the Big Four accountancy giants... break them up, Mail on Sunday
- Ruth Sunderland
Ruth Sunderland, How to start an audit of the Big Four accountancy giants... break them
up, Mail on Sunday, 17 June 2018; http://www.thisismoney.co.uk/money/comment/article-5851857/RUTH-SUNDERLAND-start-audit-Big-Four-break-up.html.
US issued protest on axing of BAE probe
Financial Times, US issued protest on axing of BAE probe, 27 April 2007
(http://www.ft.com/cms/s/0/b008fd02-f45c-11db-88aa-000b5df10621.html#axzz355ZUUp36.
World Bank hits out at Tanzania deal
- Bbc News
BBC News, World Bank hits out at Tanzania deal, 22 December 2001;
- Bae Systems
R and BAE Systems PLC [2010] EW Misc 16 (CC) (21 December 2010) available at
http://www.bailii.org/ew/cases/Misc/2010/16.pdf.
Further details of this episode are provided in Prem Sikka, Using freedom of information laws to frustrate accountability: Two case studies of UK banking frauds
Further details of this episode are provided in Prem Sikka, Using freedom of information
laws to frustrate accountability: Two case studies of UK banking frauds, Accounting Forum,
Vol. 41, No. 4, 2017, pp. 300-317
The Right Honourable Lord Justice. Inquiry into the Supervision of The Bank of Credit and Commerce International
- Bingham
Bingham, The Right Honourable Lord Justice. Inquiry into the Supervision of The Bank of
Credit and Commerce International, London: HMSO: 1992.