This Is Guernsey

By Simon Tostevin

STRONG industry opposition emerged yesterday to a draft code of corporate governance for Guernsey’s financial services sector.

At the latest Institute of Directors winter series of seminars, which was covering the responsibilities of directors, discussion turned to what members of the finance and legal communities made of the code, which closed for consultation earlier this month.

A show of hands in the 100-plus audience revealed almost all of them would prefer guidelines as opposed to a code that would operate on a ‘comply or explain [why not]’ basis.

Another show of hands established that those present preferred not to have to adhere to an additional code when they were already subjected to a higher level of corporate governance such as the UK Combined Code or the AIC Code.

Members of the finance community, including Guernsey International Business Association chairman Paul Meader, who sat in on the debate as a panellist, also criticised the draft for being geared towards the regulator as opposed to shareholders.

IoD committee member Carol Goodwin (pictured) led the practitioner working party behind the drafting process of the code with assistance from the Guernsey Financial Services Commission.

When introduced, it will be operated under a ‘comply or explain’ regime with each company required to confirm with the GFSC how it has complied with the code each year.

Ms Goodwin, who chaired yesterday’s debate, said the reaction did not surprise her because it was generally along the same lines as the responses she had received from the consultation process.

‘I wasn’t completely surprised. But until this point no one has suggested guidelines rather than a code.’

She said all the comments from the meeting would be considered within the rest of the consultation received so far, with particular weight given to the outcomes of the show of hands.

And there was no reason, she added, why guidelines would not work in the same way as a code, despite talk between herself and GFSC director-general Nik van Leuven originally concentrating on establishing a code as it would be internationally recognised.

‘I don’t think it would be that much different from a code. I think guidelines would still be setting out the principles and best practice provisions,’ she said.

‘In that sense it would be a detailed guidance for director duties, because at the moment there is nothing substantial in the companies law in terms of what responsibilities and duties directors have.’

Mr Meader, who was joined on the panel by Collas Day partner Advocate Ian Kirk and KPMG director of corporate governance in London Tim Copnell, said there was a danger of too much corporate governance stifling industry.

‘I really think what we need is better directors and not more rules, and the way to get better directors is education,’ said Mr Meader.

He was also concerned that a new code would not be proportionate between different sized firms and that the ‘comply and explain’ approach would eventually fail.

‘My hunch is if you explain too much you will end up not complying. This is not a legal code, so you could say it’s not enforceable, but it is because it’s for the regulator. My hunch is that you will be able to explain quite a bit to start with but then less and less as time goes on.’

Advocate Kirk added that although the code was not legally-binding it was likely it would end up being used in a court as evidence if any future case transpired.

Article posted on 27th February, 2010 - 2.29pm