Cowboys and Consumers - Who rules the Finance Industry?

RSG Debates is a series of round table events held throughout the year, which bring together industry leaders who are relevant to a central topic of discussion. As Head of Sanderson's Financial Recruitment division, Tim Donaghy joined some of the UK's leading CFOs to discuss: Can Business Self Regulate? To find out more about future RSG Debate events and how you can participate, please click here.

Is the Financial Services Industry run by cowboys making rash decisions with the hard earned cash of the unsuspecting public, or is this an industry that is regulated and genuinely consumer/customer focused? 

The rules and conduct of people in responsible positions within The Financial Services Industry are well documented in the FCA Handbook and the theme of the handbook is indeed consumer and customer focused. I would recommend a quick read as it is very simply written and specific in its purpose. 

A quick look on the FCA website shows that there are indeed implications to breaking the codes of conduct. On the home page the following headlines jump out at you:

“FCA fines Guaranty Trust Bank (UK) Ltd £525,000 for failures in its anti-money laundering controls”

“FCA fines compliance officer and broker whose actions enabled market abuse to be committed in October 2010“

So, if the rules are plain and simple and implications of breaking the rules are obvious, why are there still breaches and why is consumer confidence so low? 

Is the punishment severe enough? Or does the punishment fit the crime (Fred Goodwin et al)?

How many people were imprisoned on the back of the meltdown in 2008, or at any stage for that matter?

When does incompetence become negligence?

Maybe the answer lies in the level of punishment; maybe it lies in the expectation on returns demanded by an often ill informed public, or maybe it lies with the well publicised bonus culture of the industry. What is clear and certainly stressed at the event is that the challenges are complex, no one group is to blame for recent issues and that plenty of questions remain unanswered.

Debate: Is the Consumer a Regulator of Business Behaviour?

June 2013 saw the launch of RSG Debates, a series of round table dinners held throughout the year, which invite thought leaders to join together to discuss the most topical issues concerning one appointed theme. In June, the spotlight was focussed on the financial services sector and the question of whether business can self regulate. Held at Benares restaurant in Mayfair, London, the dinner was hosted by Nick Hall, Partner at KPMG, and was attended by finance directors and CFO’s from FTSE 100 companies.

The concept of regulation vs. self regulation is vast and it was to be expected that we would gather a varied range of arguments and opinions on the topic, the most interesting (and perhaps most controversial) of which I am going to share with you over the course of my next few blog posts. Don't forget, if you are interested in the financial sector, you can subscribe to the Sanderson Financial posts. To begin this series we will focus on: 

What role does the consumer have to play in bringing about positive change to errant business behaviour? 

Starbucks were used as a relevant example during this particular discussion as they paid £5m in UK corporation tax this year – something they have not done since 2009.

How to Make Bankers Accountable for their Actions

 Sanderson's Head of Finance, Tim Donaghy, comments on the Parliamentary Commission of Banking Standards' latest report and whether it will make bankers liable for their negligence.

The cross-party Parliamentary Commission on Banking Standards' fifth reports proposes that bankers are held accountable for their actions in the future, and threatens imprisonment for those guilty of 'reckless misconduct'. The report highlights that, despite numerous scandals being illuminated in recent years, senior level bankers have not been punished for turning a blind eye on their responsibilities.

The report advocates that senior bankers should be assigned clear personal responsibilities, with the legal onus on them to show they have done all that is reasonably required; recklessly disregarding their responsibilities should be a made a criminal offence; senior bankers should adhere to a new set of banking standards set by regulators; bonus pay should be deferred for up to 10 years and cancelled if a banker acts irresponsibly and banks should be legally required to put financial safety ahead of shareholder interest. 

These measures are without doubt a step in the right direction, however, it puzzles me as to why five reports on this subject have been made already, yet this is the first time a notion is being mooted! I recently attended an RSG Debates event based around the question of whether businesses can self-regulate. An interesting point was made during the course of the evening; a blue collar worker can be imprisoned for stealing £100 out of the petty cash tin, yet a CEO receives a £1m a year pension after overseeing the complete demise of a bank (RBS and Goodwin). The magnitude of the injustice of this double standard is incomprehensible and, as the report points out, for too long bankers have fallen back on the claim that everyone was party to a decision, therefore, no individual could be held accountable. 

It is about time that the high earning executives who we entrust with our money should be made liable if they are found to be negligent. Perhaps the promise of imprisonment, rather than bonus schemes, will incentivise them to be more responsible in the future?

APSCO announces growing need for Finance professionals

Tim Donaghy, Head of Accountancy and Finance at Sanderson, discusses the latest positive news for the Financial Recruitment sector.


Finally, green shoots of news from APSCO! After a year of hearing from FDs and CFOs that they are confident that there is a growing need for more qualified finance professionals, analysts are finally seeing this as a reality. But where is this growing need coming from? Although 2% doesn't sound like a huge increase, this is significant for the finance recruitment sector and is a good indicator of general business confidence. When the finance (and other) recruitment market is in full swing, requirements are created due to three major drivers:

•  Natural attrition and churn 
•  Growth 
•  Business change or projects 

Budget 2013: The Future of Employment for Young People

It came as a surprise during the Budget for 2013 to hear that, despite being caught in the worst recession the UK has seen, employment has seen an increase of  more than 590,000 positions and is continuing on a steady rise compared to last year – a result that even leading economists are struggling to explain.

Despite this triumph, our next generation of workers, currently aged between 16-24, worryingly comprise the largest percentage of those who remain unemployed. Furthermore, the number of young people who are unemployed, in contrast to the rest of the population, is mounting more rapidly than any other sector of the public. In our last post we discussed the possible social consequences of long term unemployment in this age bracket and the urgent need for schools to provide pupils with an education that will equip them with the skills required to succeed in the workplace. However, this situation is sure to have a ripple effect on the wider employment circle – when we finally come out the other side of the current downturn, will we be facing fundamental skills shortages?

Food for Thought Leadership

How do you entice some of the UK’s leading CFOs into a room to discuss regulation? Tell them it is being held  at Michelin Star chef Atul Kochhar’s restaurant, Benares,  and that the food and wine is free!

Seriously though, regulation in today’s business world is anything but a dry subject. In the Coalition Agreement published in 2010, the TorieLibDems said that they would cut red tape for businesses or individuals and not rely on rules and regulations by themselves to ‘get things done’. Exciting times for the money makers and entrepreneurs of these sunny isles I hear you say? May be not... is there less regulation now than five years ago?

Taxing Times

Questions on what is an appropriate level of taxation never go away. However, in the current economic climate the need to cut income taxes for lower income workers to put a little more money in the pockets of working families is juxtaposed with demand to tax the wealthy more heavily whether through income or so called wealth taxes on property.