If the poll predictions are correct and Labour forms the government after the general election on 4 July, one key area for change will be corporate governance. We’re already expecting a raft of new compliance regulations to fight economic crime and fraud, but Labour have pledged to go further and reform the operation of companies themselves.

The Conservative government had pledged to shake up the audit and corporate governance in the wake of various corporate scandals, such as those involving coffee shop chain Patisserie Valerie and contractor Carillion. A report by Sir John Kingman in 2018 outlined over 80 recommendations to review corporate governance. Chief among these was to replace the Financial Reporting Council with a much more powerful boardroom watchdog, the Audit, Reporting and Governance Authority (ARGA), and tighten regulation on hundreds of more private companies as ‘public interest entities.’

Labour criticised the Conservative government for not enacting these proposals, and have committed to doing so. Shadow business secretary Jonathan Reynolds said Labour would bring this about. 

“We would replace the Financial Reporting Council (FRC) with the new proposed ARGA, which will be the new body with teeth at the heart of this.”

Jonathan Reynolds, Shadow Business Secretary

While Labour have said it is a priority, there is debate about whether the reforms would make it into Labour’s first King’s Speech, scheduled for 17 July. Nevertheless, the FRC has grown, doubling in size to 450 people in the last four years and imposing higher fines on auditors. 

However there is pressure from the sector itself for primary legislation to introduce ARGA as soon as possible. UK Chair of auditors EY, Hywel Ball, said:

“At this pace of change it could be almost 10 years since the Kingman Review before we see any change in law.”

Hywel Ball, EY

Mike Suffield from the Association of Chartered Certified Accountants said:

“The reform debate has been going on far too long. We continue to believe that legislative change is necessary to give full effect to the crucial reform proposals to create a strong and effective regulator, and underpin high quality audit.”

Mike Suffield, ACCA

There has also been calls from key Labour figures such as Dame Margaret Hodge to strengthen corporate transparency. The Economic Crime Manifesto, published by a number of All-Party Parliamentary Groups, has called for a number of key corporate governance changes. 

The manifesto calls on all companies and firms to declare the identity of individuals with significant ownership or control over their activities. This must include English, Welsh and Northern Irish Limited Partnerships. The UK should also impose obligations on Companies House to verify the status of shareholders and stop people hiding behind nominee shareholders. 

The UK also needs stronger economic crime leadership and accountability, with the publication of an Anti-Corruption Strategy and the re-appointment of an anti-corruption champion, who can have genuine influence on government policy and resource allocation. At the operational level, the next government should appoint an Independent Economic Crime Commissioner to ensure accountability across government departments and substantially enhance the UK’s defences against and response to economic crime.

Labour have also committed to reforming competition, as well as the corporate governance regimes. They aim to promote innovation while protecting consumers. They aim to promote overarching regulatory structures that support sovereign capabilities and resilience, starting with our commitment to strengthen the public interest test on takeovers.

Labour have committed to ensuring corporate governance frameworks embed long-termism, enable investment and ensure greater action in the interests of their workers, customers, communities and the environment. They also want to work with trade unions on ESG objectives, and double the size of the co-operative sector in the UK. 

The General Election and Compliance – Special Webinar

Every sector could be impacted and every area of compliance is likely to be reviewed by the next government. From overhauls of financial services regulation, reviews of data protection law, closer alignment with EU regulations and an expansion of health and safety protections, the next parliament will see compliance at the centre of the regulatory agenda.

With everything from whistleblowing reform to overhauls of corporate governance, new employment rights like menopause leave and expanded equal pay rules, alongside crackdowns on tax evasion and expansion of the money laundering regulations, organisations large and small should prepare for the outcome of the general election.

This webinar will cover:

• What the main parties are pledging on key compliance areas
• Potential changes to legislation including the Equality Act, sexual harassment and employment rights
• Expected legislation on AML, bribery, sanctions, fraud and economic crime
• Possible expansion of regulations around GDPR, AI and health and safety
• Preparing your organisation for future regulatory changes and new requirements