Vince Cable has been urged to avoid a “piecemeal” approach to regulating directors as he seeks to increase trust in business.
The Business Secretary, who yesterday unveiled a series of measures aimed at improving corporate transparency, said the vast majority of firms “make an enormous contribution to society”, but some “errant” directors create complex structures that “only serve to deceive”.
Cable suggested that bank directors’ duties could be changed so they are responsible for promoting financial stability, as well as shareholders’ interests, in a bid to avoid a repeat of government bailouts for lenders such as Lloyds Banking Group and Royal Bank of Scotland.
Katja Hall, the CBI’s chief policy director, said: “Company law should be consistent, with directors’ duties common across all parts of the economy, so we’re concerned with the emergence of a piecemeal approach.
“Prioritising ‘safety and soundness’ over other important directors’ duties in the banking sector sets a dangerous precedent.”
While Cable said the plans, contained in his Transparency and Trust consultation document would not disadvantage honest directors, he promised tough action against those who “don’t play by the rules or take their responsibilities seriously”.
Under the proposals, courts could be allowed to take account of a director’s actions on society, as well as previous failures, when considering disqualification, and make directors pay compensation to creditors.
Cable also announced a review into the use of pre-pack administrations.
According to the Department for Business, there were 728 pre-pack deals last year, accounting for almost a third of all administrations.
Simon Walker, director-general of the IoD, applauded the government’s efforts to rebuild trust but warned against imposing additional red tape on law-abiding companies.
He added: “Businesses can and do fail. But this experience should not necessarily spell personal financial disaster for a director, or prevent a director from trying again.”