Changes ahead for companies

Firms urged: prepare for new rules on control and pay

IMG_1829 Peter SwabeyCompanies were today urged to prepare for new laws which will force them to declare who owns and controls them and how much they pay male and female employees.

As part of a government clampdown on rogue directors all companies and limited liability partnerships will have to complete a “person with significant control” (PSC) register from the end of this month.

Firms employing more than 250 staff were also urged to start work on examining their payrolls as they will have to declare pay scales in line with attempts to close the “gender pay gap”.

Peter Swabey (pictured above), director of policy and research at ICSA: the Governance Institute, said the new rules on disclosure would enable the authorities to know whether there were people involved in companies that they should be worried about.

“The register is an indicator that something might be wrong,” he told the institute’s Scotland conference at the Royal College of Physicians in Edinburgh.

Companies will need to list those who meet certain criteria on control, or else find out who does have control. Anyone notified will be forced to reply. Refusal to do so is a criminal offence and the register will be open to public scrutiny.

Mr Swabey said that initially the government did not intend to include any protection, but the case of a former Marks & Spencer executive who found demonstrators outside his home helped persuade them that individuals could apply for dispensation.

Even so, there is no absolute confidentiality as the details of those who succeed in their applications will be available to some organisations, such as the police and the tax office.

He said that compliance required meeting 86 pages of guidelines and the purpose of it was to “avoid avoidance”. The register will be submitted along with the annual confirmation statement which is replacing the annual return.

Morag Moffett

Morag Moffett, (above) director of the employment division at Burness Paull, said companies must begin declaring their pay differentials from April 2018, but they should start work now as there was potentially a lot of work involved.

She said a whole raft of measures are being introduced, from holiday to maternity pay, to ensure employers do not, for instance, equalise basic pay and then continue to pay male staff higher bonuses.

The current average hourly gap in earnings is 19.2% or 9.4% for full-time employees.

“That means for every pound earned by a man, a female earns 80p,” she said. “Furthermore, the gap has not reduced in any meaningful way since 1997.”

She pointed out that there are no penalties for non-compliance, but said this should not be seen as a get-out clause for companies who would find themselves open to public criticism if they refuse to comply.

IMG_1831 - scott massieScott Massie, (right) group company secretary at Aberdeen Asset Management, told delegates that “good governance” is the key to its investment strategy.

He said the company’s “quality test” on whether or not to invest is based on the fundamentals, not the share price or fashion.

“If we do not understand the company, we do not invest, regardless of the share price,” he said, adding that the company was a long-term, not a short-term investor.

“We will not sell out just because a company is not doing well.”

He said the company held shares in a company on average for eight years “which is longer than the time that a chief executive stays in his job”.

He added: “We try to avoid short-termism. Our turnover of stocks is about 5%. That means if we hold 60 stocks, two will be sold and two will come in.”

Mr Massie, who has been at Aberdeen for 14 years, said that it held thousands of monitoring meetings with investee companies. As an example, it met the directors of Standard Chartered Bank 35 times in two years to discuss board composition and performance.

Aberdeen set up two committees on remuneration (2010) and risk (2014) to recognise key developing issues in the investment world. He added that the board was taking greater note of the interests of “millennials” whose interests and habits differ from those of older generations.

Lindsay Wallace, director of risk and knowledge management at Burness Paull, noted the legislative changes taking place in document management.

In particular she outlined the new means of execution which take account of electronic communication.

Photos: By Terry Murden

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