Wednesday, February 11, 2009

The New Regulatory Environment

There is some good that comes from the miserable event in Parliament yesterday.

The Treasury Select Committee did little to shed light but its work, I think, points to how we can look forward to the changes that are needed in a new regulatory framework.

Mervyn King can begin to look for answers instead of frightening the horses.

I cannot speak of the role of compliance officers and risk managers in banks. I cannot speak for the PR industry and the role of the publicists who advised bankers facing a Parliamentary committee. But I can consider what we can learn from the debacle.

What was evident is that there is a need for enhanced corporate transparency. Transparency that allows regulators such as the FSA to have mandatory visibility of necessarily regular advice from compliance offices, risk managers and relationship managers (PR people) to boards of big commercial enterprises like banks.

Advice that can, in addition, be made, to an extent, available at times when such institutions seek support from shareholders and the public purse to re-finance their activities.

Such internal managers can be charged with a mandatory role of advice designed to protect long term shareholder value.

This changes the role of these internal managers. It gives them a mandatory role as well as an internal one.

For PR, it means that the responsible practitioner has to be able to evaluate and explicate the work of companies as it affects and can affect internal and external relationships and thereby trust and reputation. It makes them responsible to the board in the interest of shareholders and other stakeholders.

There is a case for the FSA to be charged with the role of monitoring this internal advice and acting upon it but this changes the mandate for such regulators. The mandate has to be able to respond not just the the industry sector or government but, in globalised industry and commerce, a responsibility for ensuring that the sector is not acting against the interest of the public sphere, a theory that is well grounded in Europe and more so in the USA.

Of course there is more to this but something positive is available from the farce of the Treasury Select Committee activities so far.