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AIA

Walker found lacking on banking governance failures

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2nd Oct 2009
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The major accounting bodies were unimpressed with the Walker Review into corporate governance failures in the UK banking sector, arguing that the proposed changes do not go far enough.

The Association of Chartered Certified Accountants (ACCA) said the review addresses the symptoms and not the root cause of those failures and will do little to change dysfunctional behaviour.

The Chartered Institute of Management Accountants (CIMA) called the proposals 'unrealistic', arguing that while there is a need for active shareholder engagement, Walker had not grasped what can be achieved at a reasonable cost.

The independent review, lead by Sir David Walker, issued a consultation document in July this year and will make recommendations to the government on 26 November based on the responses it receives.

In a response released this week, the ACCA said the review’s recommendations would not tackle the problem because they are based on the wrong assumption that shareholders can and will provide sufficient influence over corporate boards to ensure good governance.

“The recent crisis in the banks has demonstrated that while some shareholders had influence, they either did not or could not enforce good governance behaviour. ACCA believes that the recommendations alone will do little to enhance the ability of shareholders to influence boards and there needs to be other triggers to change behaviour,” said Dr Steve Priddy, director of technical policy and research at ACCA.

He also said the review presented an uncompetitive structure of banking of in the UK and the ACCA was ‘disappointed’ that no radical changes were suggested to shake up the current system.

“The financial crisis has highlighted that our present corporate governance system has been found wanting”, he said. “What is needed is a more analytical approach to understanding what works, what does not work and why. It is important to know what the governance system would look like when it is fixed”.

Charles Tilley, chief executive at CIMA said: "While Sir David Walker’s Review lists a number of appropriate recommendations, including those on remuneration, CIMA was disappointed to see the level to which the review has simply re-stated current thinking on corporate governance. In particular, CIMA would like companies to review more critically and independently where their specific circumstances justify deviation from the code without having to be steered by this sort of external review".
 

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