Category Archives: Business

Britain, Business, Economic, Government

Leading firms must say how chief executive salaries compare with staff

CORPORATE GOVERNANCE

LEADING companies will be forced to disclose how much their chief executive is paid compared to their average worker . . . and justify the sum.

Business Secretary Greg Clark is due to announce this week that nearly 1,000 listed firms will have to publish the ratio in a crackdown on excessive boardroom salaries.

It is also believed that a new public register will name and shame those whose investors revolt over the pay of bosses.

The plans will be announced as ministers seek to rebut criticism that they have watered down the tough approach promised by Theresa May.

Last year the Prime Minister unveiled radical proposals, such as workers being granted representation on boards, but she has since backed away from these ideas. The plans follow criticism over the high pay of executives following scandals such as the collapse of BHS.

Mr Clark will announce that the Investment Association, the fund managers’ trade body, will oversee the creation of the new register to include any company which faces opposition from at least 20 per cent of shareholders.

Ministers say the publication of ratios between bosses and UK-based workers will shine a spotlight on boardroom pay. It is unclear if the figure for chief executives would be their total package, which averaged £4.5million last year in the FTSE-100, or only their much lower base salary.

Mr Clark is also expected to say that the Government will guarantee workers at listed companies a louder voice in the boardroom by amending the Corporate Governance Code. This will be achieved, according to sources, by designating a non-executive director to represent workers, nominating a director from the workforce or a new advisory council which would have access to board members.

That would meet a commitment made in the 2017 Conservative manifesto although the Government is abandoning a general election pledge to ‘legislate to make executive pay packages subject to strict annual votes by shareholders’.

Companies will also have to produce an annual statement explaining how they acknowledge the interests of workers and wider stakeholders. In addition to the rules to be imposed on big public companies, privately owned businesses, including Sir Philip Green’s Arcadia Group, will become subject to a new voluntary code of corporate governance principles supervised by the Financial Reporting Council.

The proposals will be hailed by ministers as a robust package of reforms designed to make big firms more accountable. They come after corporate governance failings at Sports Direct International and a bitter revolt over a £14million deal for BP chief executive Bob Dudley. This has spurred the Government to pledge a crackdown on boardroom excesses.

The collapse of high street chain BHS after being sold for £1 by Sir Philip was also a factor in hardening public and political opinion against the bosses of big businesses.

This year, there were fewer major protests over the pay of executives at FTSE-100 companies but there was a significantly higher number of revolts over bosses in the FTSE-250 index.

Under Sir Vince Cable, the former Business Secretary and now Liberal Democrat leader, shareholders in public companies were handed a binding say every three years on remuneration policy.

But the annual vote on what directors receive is on a non-binding basis and looks likely to continue that way.

Standard
Business, Government, Society, Technology

Empowering humanity comes through technological advance

TECHNOLOGY & HUMANITY

Technology Empowerment

Technology firms must adapt by making people’s goals their own priorities. Only then will they significantly add to the growth of society and to the economy.

The empowerment of the individual has radically changed through how we access and utilise technology. Consider, for instance, just the way and how we now watch television. The broader picture of technological development is no longer a take-it-or-leave-it template, but a bespoke service tailored to the individual.

Earlier television broadcasts were carefully scripted and delivered to present a highly curated programme, forcing us not to only share the same worldview, but also to watch on the terms being offered by the programme makers’.

The evolution of video fundamentally changed both our view of the world and how we interact with it. In less than a century, we’ve moved to an online and digital world with billions of viewpoints, coming from governments and businesses and more importantly from people. Everyone offers a unique perspective; and, we now have a truly live culture where technologies like Periscope and Facebook Live mean that anyone can broadcast what they want and tune in when they want – on their own terms.

This illustrates that the way we use technology today is to bend it to our own needs. Change may be endemic, but the key point is that the individual is now in control. It’s no longer the case that people are adapting to technology – rather, the technology is continuing to evolve and adapt to us.

The situation now is that every time an experience is personalised, or where technology anticipates our needs and wants, we are being thrusted forefront to realise or satisfy those needs. In terms of digital evolution, this is the age of human empowerment and it matters to business. With technology that truly responds to people, based on what they want, firms can evolve from being a supplier to one of being their customers’ partner.

IntelligentX, a London-based Brewing Company, has developed an Artificial Intelligence (AI) system to continuously collect and incorporate customer feedback. It utilises this information by incorporating it into its thinking to brew new versions of the company’s beers. The firm provides feedback into its algorithms: with people’s tastes changing faster than ever before, AI seems a logical and perfect way to respond.

This is how businesses will grow their role in people’s lives, and by establishing a place in the future of society. They need to become more than just a provider of products and services.

We might like to refer to it as the hyper-personalisation of technology. It is likely to drive commercial success at the scale of entire industries, not just at the individual or micro level. The digital leaders of the world, proactive as always, are making big calls in response.

Consider Electronics giant Philips. It is looking to transform healthcare into one that becomes connected, with a comprehensive experience that’s both intertwined and accessible throughout people’s lives. Through the development of new apps and connected devices that integrate into our lives, it will become possible for health professionals to live alongside each patient. This will allow them to build a closer, more personal relationship, and an opportunity to provide comprehensive – not just reactive – care packages.

Paradoxically, for patients, connected healthcare isn’t an improvement because of the technology itself. The draw is the empowerment it gives individuals over their own health – you only need to consider how wearable technologies are driving a tailored approach to personal fitness programmes.

Company conglomerates like Philips have the leading edge because their technological strategies focuses on the needs of the individual patient, and on their terms.

If any business is to become a true partner to people that process must start with technology. No doubt, the path ahead will have its challenges. But the foundations are built on matters of trust.

Yet, barely one in two members of the public say they trust businesses to do what’s right. Even fewer look on business leaders as credible sources of information. If people are to value these new partnerships, companies must work hard to gain and by keeping that trust.

One of the best ways of doing this is by putting the power in the hands of the customers. That can be achieved by designing technology that works for them. This will mean an end to technology tools whose power is only unleashed when customers adapt to or in learning how to use them.

Technology’s great new strength lies in its growing humanity. Tools that interact with people – structured in such a way that they learn from those exchanges – should be able to adapt for any future interaction that makes the experience of using them all the more human.

To put these new adaptive technologies to use, businesses must adopt people’s goals as their own. Technology is now crucially the agent of change and it should be enabled to empower people in an interactive and collaborative way.

When companies are aligned to people’s individual goals and aspirations, only then will they be contributing to the growth of society and the economy.

Standard
Business, Government, Legal, Society, Taxation

New tax offence to be made within Criminal Finances Act 2017

TAX EVASION

The UK Government is expected to bring into force a new tax offence in the Criminal Finances Act 2017. It is likely to become law in September.

What is startling about the new offence is that it will make a business guilty as a result of the criminal conduct of its employees and others who may act on its behalf.

Where an individual facilitates tax evasion the business will be guilty of failing to prevent that facilitation unless it can demonstrate that, at the time of the employee’s conduct, it had appropriate procedures in place to prevent facilitation arising.

This new offence will have an immediate impact for many firms. Implicitly, it also shows the UK Government’s preferred direction of travel for corporate liability, i.e. to criminalise business for the actions of connected persons.

The new tax offence will be of concern to banks, accountants, Independent Financial Advisors, and to anyone providing tax advice. Businesses are now eager to know what they should have in place to make sure that employees and others who act on their behalf are not facilitating tax evasion for clients and customers. They will also want to know how they can show that they have taken every reasonable step to prevent the facilitation of tax evasion in the first place. An organisation that is criminalised because of the actions of its employees or third parties will have serious implications for its long-term future and health.

There are some easy first steps that businesses can take to strengthen their position. Policies and procedures in place at present should be reviewed, with an emphasis on explaining to people what is and is not acceptable. These should be updated if it is deemed necessary in clarifying the position. Any procedural improvements should be freely communicated to all employees and others providing tax services for the business.

To understand the wider direction of travel for corporate liability we need to understand why there is a need for change. The historic approach to successfully prosecute a company required the identification of a person in the business who possessed a “directing mind and will” and who, specifically, condoned or was aware of the crime. Known as “the identification doctrine” there are a number of difficulties with applying this approach. For example, it may not be difficult to identify the ‘directing mind’ in a family-owned run business where all of the major decisions are taken by a small group of people. It is quite another for a prosecutor to identify the directing mind within a global business that has a complex structure and sophisticated approach to decision-making.

The new offence follows the same methodology and approach as the Bribery Act.

The UK Government has also been consulting on wider reform of corporate crime. One of the options being given serious consideration is a wider roll-out of the “failure to prevent” approach across the spectrum of economic crime. This will place an onus on a business not only to show that it has done no wrong, but also to demonstrate that the organisation is properly policing its employees and others acting on its behalf. Whilst not quite the end of the presumption of innocence until proven guilty, any firm who allows their employee or connected person to break the law had better have a very good story to tell.

 

Standard