Grime and punishment

18 March 2021 By Aimee Donnellan Follow @aimeedonnellan

The government wants company directors to face bans and pay clawbacks if they cause losses or failure. The proposals’ fuzzy language may warp incentives, and lead to legal disputes. PM Boris Johnson’s desire to attract listings to Britain after Brexit may also blunt their teeth.

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The British government on March 18 proposed imposing tougher reporting obligations and pay restrictions on company auditors and directors.

Company boards will be required to set out what controls they have in place, and auditors will have to give an annual resilience statement setting out how the company plans to deal with challenges in the short, medium and long term. In addition, the government proposed that directors should repay bonuses if a company fails or suffers a financial loss or reputational damage. Newly listed companies or emerging growth companies could be exempt from the new requirements to ensure they do not present a deterrent to seeking a listing. The proposals are subject to a four-month public consultation.

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