UK: FRC consultation - Guidance for Directors of Listed Companies on Going Concern and Financial Reporting

Listing Rule 9.8.6 requires listed companies incorporated in the UK to provide in their annual report "a statement made by the directors that the business is a going concern, together with supporting assumptions or qualifications as necessary, that has been prepared in accordance with Going Concern and Financial Reporting: Guidance for Directors of listed companies registered in the United Kingdom, published in November 1994".

The 1994 Guidance is now the subject of review: the Financial Reporting Council has published a consultation paper in which it states:

The Guidance for Directors was written by a Working Group formed under the auspices of the Cadbury Committee that reported on the Financial Aspects of Corporate Governance. The formation of the Working Group arose out of concerns that there had been several high‐profile company failures where there had been no apparent indication of the imminent problems in the previous year’s report and accounts.

The objective of the Guidance for Directors is to support good corporate reporting and, in particular, the requirements of the Listing Rules and Accounting Standards. When a company is not a going concern this does not necessarily mean that it is, or is likely to become, insolvent. The Guidance for Directors is not intended to address aspects of insolvency and, in particular, is not intended to support the requirements of the Insolvency Act 1986.

In the period since 1994 there have been substantial changes to the accounting standards applied by directors of listed companies. This is particularly the case for directors preparing consolidated accounts required to comply with International Financial Reporting Standards (IFRSs) as adopted by the EU.

The FRC observes that current economic conditions are creating particular challenges for companies. Recent developments in global debt markets have led banks to be cautious of lending to one another (the so‐called “credit crunch”). This has severely restricted liquidity which has created unexpected financial difficulties for banks and entities that depend on the availability of loans as a key source of capital. Many market commentators are now forecasting a period of reduced growth and in some cases recession, with the result that going concern questions are likely to need to be considered in more detail by Boards of Directors.

In view of these deteriorating economic conditions the FRC has concluded that this is an appropriate time to consider whether the existing Guidance for Directors is necessary and remains appropriate, or whether it can be improved.

Note: The UK's Combined Code on Corporate Governance (June 2008) provides in Section C ("Accountability and Audit") the following provision (C.1.2): "The directors should report that the business is a going concern, with supporting assumptions or qualifications as necessary".

Postscript (2 Sep 2008): For further comment see this short article in the Financial Times newspaper. 

India: company law reform moves a step closer - Companies Bill 2008 approved by Cabinet

In 2005 the Irani Report, on the reform of India's company law, was published. Legislation to replace the Companies Act 1956 has been expected for some time. Its introduction has moved a step closer: today it was announced that the Companies Bill 2008 has been approved by the Union Cabinet and will be introduced in Parliament in October. 

The Government's announcement contains an overview of the purpose of the Bill: to provide the principles for the internal governance of companies and a framework for their regulation, administered by Central Government, but with a much greater role for shareholders.  Specific proposals include:

• The introduction of a new entity, the "one-person company".
  
• The abolition of shares with differential voting rights.
  
• Provision for the duties and liabilities of directors, with every company to have at least one director resident in India.
  
• At least one third of board directors to be independent [it's not yet clear to which companies this rule will apply; the Irani Committee proposed that is should apply to public listed companies and those taking deposits from the public]. 
  
• Insider trading by directors to be recognised as a criminal offence.
  
• Auditors' rights and duties to be explained.
  
• Class action suits by shareholder associations to be permitted.
  

USA: board oversight of environmental issues

The Wall Street Journal has reported, in an article titled "Environmentalism Sprouts Up On Corporate Boards", that "About 25% of Fortune 500 companies now have a board committee overseeing the environment, compared with fewer than 10% five years ago". 

USA: California: directors' duties and corporate social responsibility

Section 309 of the California Corporations Code provides that a director must act in good faith, in the manner in which he/she believes to be in the best interests of the corporation and its shareholders. A proposal to amend Section 309 is currently before the California State Legislature. Assembly Bill 2944 , introduced by Assemblyman Mark Leno, will provide that in acting in the best interests of the corporation, the director may consider:

(1) The long-term and the short-term interests of the corporation and its shareholders.

(2) The effects that the corporation’s actions may have in the short term or in the long term upon any of the following: 

• The prospects for potential growth, development, productivity, and profitability of the corporation.
  
• The economy of the state and the nation.
  
• The corporation’s employees, suppliers, customers, and creditors.
  
• Community and societal considerations.
  
• The environment. 
  

The draft Bill makes clear that the introduction of the above provision will not impose on the director any legal or equitable duties, obligations of liabilities, or create any right or cause of action against the director. According to Assemblyman Leno, the Bill "would promote socially responsible corporate conduct by authorizing boards of directors to consider the interest of the full community, the environment and employees, along with the interest of shareholders, when making official decisions on behalf of the corporation".  There has, quite predictably, been opposition. For example, the Corporations Committee of the Business Law Section of the State Bar of California has argued that the Bill would undermine director accountability to shareholders without effectively promoting interests of non-shareholder stakeholders.

Notes:

[1] Progress of the Bill can be monitored here and for an overview of the legislative process in California, click here. 

[2] Bill 2944 does not go as far as the UK Companies Act (2006) which, in Section 172, requires the director to act:

in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to: (a) the likely consequences of any decision in the long term, (b) the interests of the company's employees, (c) the need to foster the company's business relationships with suppliers, customers and others, (d) the impact of the company's operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and (f) the need to act fairly as between members of the company".

Belgium: corporate governance code - proposed changes

Belgium's Corporate Governance Committee has proposed several changes to the Belgian Corporate Governance Code. A consultation paper is available here (in Word format) and a draft of the new code is available here (also in Word format). The proposed changes address a wide range of areas including corporate social responsibility, the gender diversity of boards, board evaluation, directors' remuneration and the remuneration report. 

UK: PwC report on non-executive directors

PwC has published the 2008 edition of its annual report Non-Executive Director Practice and Fees, which is available for purchase from PwC (see here). A summary of the main findings has, however, been provided in a press release available here. Highlights from the report include (to quote directly from the press release):

Formal review of corporate governance and board effectiveness is becoming increasingly prevalent in UK companies, with 84% of respondents conducting annual performance reviews of their board. In addition, the average [non-executive] director’s time commitment has risen from 15 days in 2003 and 20 days in 2007 to 21 days in 2008.

Fee levels – fee levels continue to be influenced by both company size and time spent doing the job. The increase in fees for directors and chairmen is less pronounced than in previous years (an increase of 15.6% for directors and 25.0% for chairmen in 2008). 

Terms of appointment – there has been little change to policy regarding non-executive director appointments since last year. Most (78%) NEDs are appointed for an initial three-year term. 

Board structure – Analysis of the percentage of non-executives on the main board indicates that a 50/50 ratio of executive/non-executive is the median practice, although larger companies have a higher proportion of non-executives to executive directors (60/40 ratio).

Outside appointments – this year the survey showed a difference of market practice between smaller and larger organisations. In companies with revenues up to £500m, over half (51%) the companies have no executives serving on another companies’ board and are less likely to encourage executives to accept a non-executive appointment. Almost two thirds (62%) of companies with revenues over £500m have executives serving on other companies’ boards. The percentage was 52% and 59% in 2007".

Notes:

[1] The report is based on a survey of 155 companies and information in the most recently available annual reports of 1,500 quoted companies with year ends from September 2006 to February 2008.

[2] An overview of the 2007 report is available here.

ACCA: publication of sustainability agenda

The Association of Chartered Certified Accountants has published a document titled "Going Concern? A Sustainability Agenda for Action". This sets out recommendations for business, government and the accountancy profession, in eight areas including corporate governance. The recommendations concerning corporate governance include:

• Businesses should make sustainability issues a core part of their strategy, and that risk identification and management should be governed at board level.
• Organisations should report on the linkage between the sustainability issues they face and the corporate strategies they choose, including the financial implications of their most significant sustainability risks.
• Businesses should integrate sustainability KPIs [Key Performance Indicators] within their managerial reward evaluation procedures.
• Investors should actively require the organisations in which they invest to demonstrate that CSR and sustainability considerations are appropriately embedded in the system of corporate governance and are a central element in the strategic planning process.
  

IASB exposure draft - Improvements to IFRSs

The International Accounting Standards Board (IASB) has issued a proposed exposure draft titled "Improvements to IFRSs". For further information see this press release and the information here concerning the IASB's Annual Improvements programme.

UK: takeover regulation review - IoD response

The Institute of Directors has today published its submission to the Takeover Panel's review of certain aspects of takeover regulation (about which see here, pdf). In its submission, available here (pdf), the IoD argues that all bids for major UK listed companies should be conditional on achieving the support of the shareholders of the acquiring company. The IoD explains its position as follows:

The IoD believes that a market for corporate control is a valid component of an effective corporate governance system. The threat of hostile takeover can provide a source of discipline for severely underperforming companies and their management. However, takeovers are difficult to implement successfully. Many takeovers do not result in a combined enterprise that is stronger that the sum of its parts. A number of academic studies have shown that contested takeovers, on average, destroy value for the shareholders of the acquiring firm [Cosh and Hughes (2008), Martynova and Renneboog (2008) and Tuch and O'Sullivan (2007)]. Widespread use of takeovers may also encourage a short-termist management approach, both amongst acquisitive companies and companies under threat of takeover. As a result, we view hostile takeovers as a governance mechanism of last resort. The presence of an effective board (containing a high proportion of independent, knowledgeable and challenging non-executive directors) and an ongoing process of engagement between boards and shareholders should be regarded as the main means of ensuring the success of the company over the longer term.

When significant takeover bids do occur, the final say on the commercial viability of the transaction should be a matter for shareholders. Furthermore, for such an important (and potentially risky) corporate event, it is important to ensure that the shareholders on both sides of the transaction are fully supportive of such a step. The Takeover Code provides a fair and transparent mechanism through which to solicit the support of offeree (i.e. target company) shareholders during a hostile takeover bid. However, there is currently no guarantee that a takeover transaction has the support of the offeror (acquiring company) shareholders. The UK model of corporate governance is based on the principle of shareholder monitoring and oversight of corporate activity. In our view, it is consistent with this approach to require that all bids for major UK listed companies should be conditional on achieving the support of the shareholders of the acquiring company".

UK: annual election of directors

Today's Financial Times newspaper reports, in an article titled Investors oppose annual board vote available here, that Hermes, Railpen and the Universities Superannuation Scheme have "written to 700 companies to encourage them to ignore new guidelines [in the UK Corporate Governance Code] that require the annual re-election of board members".

UK: women on the boards of listed companies

In response to a question asked yesterday in the House of Lords concerning women on public bodies and listed companies, Baronness Verma responded on the Government's behalf (Hansard, col 757 to 758):

... we have pledged to take action to promote gender equality on the boards of listed companies. However, we have more to do on the detail and in due course will be making an announcement setting out our future direction ... it is all about engaging with business and business organisations. We will engage with all relevant partners in developing our programme to fulfil the commitment in the coalition agreement. Head-hunters and recruitment companies will be aware of the stronger provision in the revised UK Corporate Governance Code, published on 28 May this year, on the importance of boardroom diversity ... we are working very hard to encourage people to work with us, rather than enforce an extra regulatory burden".

Elsewhere, the Guardian newspaper reports (see here):

The European Commission has warned companies that if they do not move voluntarily to ensure gender balance on executive boards, it will force them to. Fundamental rights commissioner Viviane Reding told the European Parliament: 'Equality in decision-making is not yet a fact ... I do not rule out the possibility of putting forward legislation in this area'.

According to her spokesman, Matthew Newman, the centre-right Luxembourgeois commissioner is giving companies a year to sort out imbalances. If they do not act, Brussels will consider legislation and other measures committing them to the sort of quotas that have recently been introduced in Spain and some German states".

Norway: proposed amendments and additions to the Code of Practice

The Norwegian Corporate Governance Board, which is responsible for the Norwegian Code of Practice for Corporate Governance, has published a consultation paper setting out proposed amendments and additions to the Code: see here (pdf). Amongst the proposed additions is one requiring the board to define the company's basic corporate values and to formulate ethical guidelines and guidelines for corporate social responsibility in accordance with these values.

UK: the Manifest and MM&K executive remuneration survey

Today's Guardian newspaper reports - see here - the results of the latest remuneration survey conducted by MM&K and Manifest. According to the Guardian's report:

Chief executives of FTSE 100 companies have seen their remuneration rise by 5% to an average of £3.1m since 2008, while earnings per share fell by 1% over the same period ... Over the past 10 years chief executive remuneration has quadrupled while share prices have declined, suggesting little or no link between rewards, performance and shareholder value, according to MM&K and Manifest".

The full survey results are not available free of charge although MM&K have published a short overview, including a useful graph showing the composition of CEO pay over the past 10 years, here (pdf).

Australia: the ASX Corporate Governance Principles and Recommendations

Earlier this year the Australian Securities Exchange Corporate Governance Council published for consultation proposed changes to the second edition of its Corporate Governance Principles and Recommendations. The submissions have been published (here) along with the Council's response (here, pdf). The majority of submissions provided strong support for the Council's changes, which address, for example, board structure and diversity and the remuneration committee.

A copy of those Principles and Recommendations which have been amended is available here (pdf). A comparative table showing the Principles and Recommendations before and after the changes is available here (pdf). An overview of the changes is available here (pdf).

UK: corporate governance and AIM companies

Companies listed on AIM - the London Stock Exchange's Alternative Investment Market - are not subject to the "comply or explain" regime of the Combined Code on Corporate Governance.  The LSE AIM Rules for Companies (2007) contain some provisions concerning the conduct of directors but these are not intended as a substitute for the Combined Code. The corporate governance practices of AIM companies have been explored in a recently published PwC report titled "Corporate Governance and AIM - An assessment of the governance procedures adopted by AIM companies". According to the report's executive summary:

...governance procedures adopted by AIM companies vary widely. It is apparent that good governance is not necessarily a function of size of the company or its location, and it is hard to argue that the bigger the company on AIM, the better the governance. This survey shows that the composition of the Board is a particular area of weakness for many AIM companies. The need for strong independent non-executive director representation on the board appears to be something many AIM companies have yet to recognise. Perhaps linked to this, is the fact that only a fifth of the AIM Top 100 reported that they had assessed their Board effectiveness. This fell to only 5% of the smallest AIM companies in our sample. It remains to be seen whether the current voluntary approach to governance is a sustainable model for AIM, especially when the evidence of this survey shows a relatively limited application of best governance practices, across all segments of the market".

UK: Scotland: unfair prejudice, implied terms and the affairs of the company

An interesting judgment was handed down yesterday by Lord Glennie in Scotland's Court of Session (Outer House). The case - Gowanbrae Properties Ltd., a petition of [2008] CSOH 106 - concerned a petition presented under Section 994 of the Companies Act (2006) (the unfair prejudice remedy, formerly Section 459 of the Companies Act (1985)). The case deserves attention because of Lord Glennie's comments on the width of the remedy and also because it provides a good illustration of the difficulties associated with determining whether prejudice has been suffered by a shareholder qua shareholder.

The petitioner held redeemable preference shares in the company. At the time that the preference shares were created, the company's articles were amended to provide for the redemption of the preference shares on a specified date: the day on which a certificate of practical completion was issued in respect of the development of a property owned by the company. The company's board decided not to proceed with the development of the property. The petitioner claimed that this prevented the redeeming of its shares and that this amounted to the conduct of the company's affairs in a manner unfairly prejudicial to its interests.

In order to bring their claim within Section 994, the petitioner argued that the directors' decision ended the basis on which the parties had entered into association; it was thus unfair, the petitioner argued, for it to be bound to continue as a shareholder in the company. Lord Glennie rejected this argument and the argument that a term should be implied requiring the company to achieve practical completion. His Lordship dismissed the petition and in the course of his judgment observed (at para. [20]):

If there is no obligation on the Company in terms of the implied term contended for by the petitioner, it must follow that the Company is free to make commercial decisions in its own interests. The directors owe a fiduciary duty to the Company and complaints can be made against them if, in breach of that duty, they have regard to extraneous matters, such as a desire to benefit some other company. The court will not lightly infer from surrounding circumstances the existence of an understanding to which the Company should be held in equity and which would prevent it from making decisions in its best interests..."

Lord Glennie also made the following interesting observations with regard to the petitioner's claim and the court's jurisdiction under Section 994 (at para. [22]):

The essence of that jurisdiction [Section 994] is that the affairs of the company have been conducted in a manner which is unfairly prejudicial to the interests of the petitioner as a member of the company. The petitioner's claim, as was stressed repeatedly in argument, is based on the fact that it had an accrued right to payment ... It seems to me to be arguable that the prejudice which the petitioner has suffered, if it be prejudice, is as a seller of shares rather than as a member of the company. In response to this argument, I was referred on behalf of the petitioner to the case of Gamlestaden Fastigheter AB v Baltic Partners Limited [2007] 4 All ER 164. In that case a shareholder claimed under the Jersey equivalent of section 459 on the basis that he was a creditor, and would not have advanced sums to the company but for having been a shareholder. This, it was argued, illustrated the width of the jurisdiction. Those facts are, of course, the reverse of the present circumstances ..."

Note: For an earlier decision of Lord Glennie considering Section 994, see: West Coast Capital (Lios) Ltd. [2008] CSOH 72.

USA: Delaware - Supreme Court opinion in CA Inc v AFSCME

The Delaware Supreme Court has given its opinion in CA Inc. v AFSCME Employees Pension Plan (No. 329, 2008). The opinion has been keenly anticipated because of the issues it raises about the management of companies and the role of the directors and shareholders.  AFSCME, a stockholder in CA Inc. ("the company"), submitted a bylaw for inclusion in the company's proxy materials for its 2008 annual stockholder meeting. The bylaw, if accepted, would require the board of directors to reimburse a stockholder (or group of stockholders) the reasonable expenses incurred in nominating one or more candidates in a contested election of the board of directors. 

The company's board decided to exclude the proposed bylaw from the proxy materials. The SEC was informed and a request was made for a "no action" letter (one indicating that enforcement action would not be taken against the company for its exclusion of the proposed bylaw). The company argued that the proposed bylaw was not a proper subject for a stockholder action and if implemented would breach Delaware General Corporation Law (DGCL). The AFSCME obtained legal advice taking the opposition position. The SEC decided to ask the Delaware Supreme Court for its opinion - the first time it has done so under new clarification rules in the Delaware Constitution (Article IV, §11(8), about which see here) - and posed two questions.

The first question was whether the AFSCME proposal was a proper subject for action by shareholders under Delaware law. The court held that it was and observed:

The shareholders of a Delaware corporation have the right “to participate in selecting the contestants” for election to the board. The shareholders are entitled to facilitate the exercise of that right by proposing a bylaw that would encourage candidates other than board-sponsored nominees to stand for election. The Bylaw would accomplish that by committing the corporation to reimburse the election expenses of shareholders whose candidates are successfully elected. That the implementation of that proposal would require the expenditure of corporate funds will not, in and of itself, make such a bylaw an improper subject matter for shareholder action".

The second question for the court was whether the AFSCME Proposal, if adopted, would cause the company to violate any Delaware law to which it was subject. The court held that it would. In reaching this decision, the court considered the proposed bylaw in the abstract and stated that it had to consider:

... any possible circumstance under which a board of directors might be required to act. Under at least one such hypothetical, the board of directors would breach their fiduciary duties if they complied with the Bylaw. Accordingly, we conclude that the Bylaw, as drafted, would violate the prohibition, which our decisions have derived from Section 141(a), against contractual arrangements that commit the board of directors to a course of action that would preclude them from fully discharging their fiduciary duties to the corporation and its shareholders".

Unsurprisingly commentators have been quick to describe the decision as a further example of the director-centric nature of Delaware law but the court's opinion is rather more nuanced than this description suggests.  For further discussion see:

Harvard Corporate Governance blog | Wall Street Journal article | Professor Bainbridge's blog | Risk & Governance Blog | Delaware Corporate and Commercial Litigation Blog (with links to other blog posts) | 

UK: England and Wales: directors' liability for inaction

The High Court has today given judgment in Lexi Holdings v Luqman & Anor [2008] EWHC 1639 (Ch). The case concerned allegations of breach of duty made against several directors. It was argued that the inaction of these directors - including their failure to disclose to the board information known to them - had caused the losses resulting from the misappropriation of the company's assets by the managing director. The trial judge (Briggs J.) rejected this argument because causation could not be established but he nevertheless made some interesting points with regard to directors' duties.  In evaluating the claims Briggs J. considered the duties of directors (under the law before the codification of directors' duties in the Companies Act (2006)) and held that that the standard of care expected of directors is assessed using a dual objective/subject test. In this regard, Briggs J. observed (paras. [37] and [38]):

The objective test sets the basic standard. It is no excuse for a director to say that, in fact, she did not have the general knowledge, skill or experience reasonably to be expected of a person carrying out her appointed functions. The subjective test potentially raises the standard by reference to any greater general knowledge, skill or experience which the particular director actually has. To that analysis may be added the principle, established for example in Re City Equitable Fire Insurance Company Limited [1925] Ch 407 that, because of the essentially fiduciary nature of the office, a director is expected to apply to the management and custodianship of the company's property that same degree of care as she might reasonably be expected to apply in the management and custodianship of her own property".

Briggs J. then proceeded to consider the proper course of action for a director resigning from his/her position in circumstances where he/she is concerned about the conduct of the other directors.  The comments of Briggs J. in this regard are of particular interest because he recognised that resignation alone may not be a sufficient response (at para. [39]):

The fiduciary nature of the office also affects the question whether, and if so when, resignation may be an appropriate response by a director to circumstances coming to her attention. Prima facie a director who no longer wishes to perform her duties, or who finds it impossible to do so, may properly resign; see Re Galeforce Pleating Co Ltd [1999] 2 BCLC 704, at 716 c-d. But a director who wishes to retire may nonetheless be required to take steps to deal before departure with a pressing matter calling for attention, or to put her continuing colleagues on the board in possession of information known to her relevant to the matter in question, so as to enable them to deal with it. Exceptionally, a director may upon departure be obliged to put relevant information in the hands of the company's shareholders or other stakeholders, if not satisfied that continuing colleagues on the board have the inclination or the ability to deal with a matter of concern".

Germany: corporate governance developments

A the end of June, at the 7th German Corporate Governance Code Conference, Dr. Gerhard Cromme delivered his final speech as chairman of the Government Commission on the German Corporate Governance Code. In his speech, Dr Cromme discussed the development of the Code - widely known as the Cromme Code - and reflected on the German two-tier board model and issues associated with the transparency of business decisions and executive pay.  Regarding the latter, Dr Cromme observed:

In connection with cases of excessive severance payments, there were calls to shorten the term of management board contracts from five years to, say, three years. This would have limited the amount of potential several payments without introducing a severance payment cap. However, we came to the conclusion that the five-year term of office is the greater good - for reasons of planning and reliability alone, but also in the interest of a long-term corporate strategy. Only first time appointments should generally be made for a shorter term. Instead of shortening management board contracts, we introduced suggestions on the severance payment cap in 2007. At the start of this month we took this a logical stage further and upgraded the suggestions to recommendations. This means that non-compliance with this rule has to be disclosed in the annual declaration of conformity. This is transparency which will bear fruit in the long-term and change patterns of behaviour".

Further information about the recommendation on severance pay is available here and a video of the conference is available here. Interestingly, the UK's Financial Times newspaper has reported, in a piece titled "Berlin plans to curb excessive executive pay" (online edition, July 10):

Berlin is poised to crack down on what it considers 'excessive' executive pay in a move that could curtail the use of stock options in Germany. The Christian Democratic Union of Chancellor Angela Merkel has set up a working group that will start work in September on concrete proposals. These are likely to include a tightening of corporate governance rules and corporate taxation possibly as soon as the end of this year. The proposals, to be finalised in the autumn, are likely to make it into law since the CDU has the support of its coalition partner the Social Democratic party. The CDU initiative is intended to target DAX-listed companies, but would also affect executives of foreign companies who live in Germany".

NB:

[1] In the UK, under Section 188 of the Companies Act (2006), directors' service contracts exceeding 2 years (or those with any fixed or rolling notice period exceeding 2 years) require shareholder approval. This provision applies to all companies.

[2] The UK Combined Code on Corporate Governance (June 2008) provides:

B.1.6 Notice or contract periods should be set at one year or less. If it is necessary to offer longer notice or contract periods to new directors recruited from outside, such periods should reduce to one year or less after the initial period.

UK: the FSA's annual report 2009/10

The Financial Services Authority has published its 2009/10 annual report: see here (pdf). Whether this will be the last report from the FSA as it is currently organised should become clear (or clearer) this month. The emergency budget on June 22 provides a good opportunity for plans to be published but the Financial Times newspaper suggests (here) that proposals may be published next week.

Meanwhile, the report provides an overview of the FSA's actions in the past year. There is a section titled "Corporate governance and Significant Influence Functions" which states:

As part of our supervisory enhancement programme,we now place much greater emphasis on the role of senior management at firms ... in 2009/10 we completed 377 cases involving a significant influence function (SIF) interview where 27 were withdrawn by the firms concerned ...

On governance more widely, in November 2009 Sir David Walker completed his Treasury-commissioned review of corporate governance in banks and other financial industry entities; our proposals in the January [Consultation Paper] cover the FSA-specific recommendations in the review. Sir David’s recommendations address many current governance concerns and, as we have said publicly, we intend to play our part in supporting their delivery alongside the Financial Reporting Council (FRC) and work in relation to the Corporate Governance Code (formerly the Combined Code)".