Corporate governance needs scrutiny, says Portillo

IT’s not just the financial regulators that need an overhaul after the banking crisis, it’s company governance measures too, according to Michael Portillo.

Regulatory bodies in the UK lack of expertise, self confidence, and are weak because of their general confusion, said the political commentator at a business event for Manchester Jewish Community Care, yesterday.

“I think that often regulation is in a way self destructive. You get lots of people to fill out forms and tick the boxes, which gives the illusion you are regulating, actually what you are doing is accumulating paper work.

“The real supervision required is a few people with real understanding and expertise in the market to detect when things are going badly wrong. A discerning person with enough self confidence and authority should have blown the whistle on what was going on.

“But there is a lot of cosiness between the regulators and the regulated, and an exchange of personnel between those organisations, which I think has made the regulatory system not only ineffective but also a laughing stock,” he said.

But he emphasised that the banking failures could not solely be laid at the door of the Financial Services Authority, and that there had been clear failures of governance within companies.

“There are real question marks about how our governance policies work in this country,” he said.

“It seems to be that if you have chief executives who earn £1m to £2m, and then you are asking them to be supervised by non-executive directors who earn only £50,000.

“Then either you are hiring non-executive directors who are of much lower quality than the chief executive or you are hiring people of the same quality but for only a very small amount of their time. That has been exposed and much of that needs to be changed.”

The event, held at The Freemasons Hall in Manchester in aid of The Nicky Alliance Day Centre, was attended by more than 150 business people.