The UK’s corporate governance watchdog is facing fresh embarrassment over its own leadership amid a failure in Whitehall to rubber-stamp the appointment of its next chairman.
Sky News has learnt that a plan to name Keith Skeoch as interim chair of the Financial Reporting Council (FRC) has been delayed despite having been signed off by Alok Sharma, the business secretary.
Government sources said the appointment of Mr Skeoch, who had served as a non-executive director of the FRC for more than eight years, was supposed to have been announced in August.
Image: Mr Skeoch recently stepped down as chief executive of Standard Life Aberdeen
Mr Skeoch, who recently stepped down as chief executive of the asset management group Standard Life Aberdeen, has now been forced to leave the FRC’s board altogether until the impasse is resolved.
His biography has been removed from the regulator’s website – albeit on a temporary basis.
One Whitehall source said Mr Skeoch’s appointment as the FRC’s interim chair was now awaiting sign-off from the Treasury.
The former fund management boss is seen in the City as a sound choice to take the role temporarily, although the fact that he had been an FRC director for such a long period already raises its own questions around the regulator’s stewardship.
Mr Skeoch had sat on its board since March 2012, meaning that when he was removed from its website in the last few weeks, he was within months of reaching the nine-year point at which directors of listed companies are no longer deemed to be independent under the FRC’s corporate governance code.
In a statement, a spokeswoman for the Department for Business, Energy and Industrial Strategy said: “The day-to-day running of the Financial Reporting Council remains the responsibility of its CEO Sir Jon Thompson.
“We will announce next steps on recruitment of a new chair in due course.”
Image: Mr Skeoch is seen as a sound choice in the City
The delay is the latest awkward development at the FRC, which is responsible for setting the UK’s corporate governance and stewardship codes – the frameworks within which Britain’s publicly traded companies are expected to be run.
Mr Skeoch’s intended appointment as the FRC’s interim chairman was necessitated by the sudden departure of Simon Dingemans in May.
Mr Dingemans, who had only been in the role for less than a year, stepped down after a disagreement with BEIS about his other business interests.
One governance expert described the government’s statement about the chief executive overseeing the day-to-day running of the FRC as “a nonsense”.
“Jon Thompson is a very good CEO, and he is doing a very good job, but that doesn’t mean the FRC board should be without an effective chairman,” the person said.
“This is supposed to be the organisation responsible for setting standards for good governance.”
Image: The FRC has recently confirmed plans to press ahead with the effective break-up of the big four auditors
It was unclear on Thursday which director is chairing FRC board meetings until an interim or permanent successor to Mr Dingemans is appointed.
The leadership vacuum comes at a critical time for the audit watchdog, which is grappling with the impact of the coronavirus crisis on the financial reporting of London-listed companies as well as the wider audit reform agenda.
The FRC has recently confirmed plans to press ahead with the effective break-up of the big four auditors – Deloitte, EY, KPMG and PricewaterhouseCoopers – by forcing them to separate their audit and consulting operations.
Under its proposals, the quartet must submit detailed blueprints to the FRC this month, with ‘operational separation’ coming into effect in 2024.
The shake-up will represent a radical overhaul of the big four’s businesses, and has been sparked by public and political outrage over a string of audit failures at companies, such as Bhs and Carillion, which ultimately collapsed with the loss of thousands of jobs.
The scandal over the collapse of Wirecard, the German payments company, has intensified the demands for urgent reform.
‘Society wants to know much more about what business is doing’
Whether Mr Skeoch or another person is appointed to lead the FRC, its latest leadership change comes amid uncertainty about its own longevity.
Sir John Kingman, the former Treasury mandarin who now chairs Legal & General and Tesco Bank, proposed in a government-sponsored report last year that the FRC should be abolished and replaced by a statutory body called the Audit, Reporting and Governance Authority.
Mr Sharma has signalled his desire to implement the recommendations of Sir John and a separate review of auditing by the City grandee Sir Donald Brydon.
Mr Skeoch could not be reached for comment.