Directors should be more accountable for failure, while also taking more risks, says U.K. regulator

Director accountability is back in the spotlight in the U.K., even as the government pushes for regulatory simplification to cut red tape and drive growth. This raises questions about how boards can be encouraged to take risks to grow their businesses while also being held more accountable for governance failings. As regulators and auditors debate where the line between accountability and ambition should fall, what should compliance managers be advising boards, and what changes are already in progress?

Directors should be held as accountable as auditors when a company fails, according to Richard Moriarty, CEO of the U.K.’s Financial Reporting Council (FRC). Speaking at an event at the Centre for Public Interest Audit (CPIA) in March, he said the FRC needs urgent overhauling and called for “vital plumbing” to modernise it. He had a similar message for an audience of chartered accountants when he told the ICAEW’s Corporate Governance Conference that plans for the long-awaited new regulator, the Audit Reporting and Corporate Governance Authority (ARGA), should move ahead in the public interest.

Moriarty said there are two parts of the government’s modernisation efforts that resonate with politicians, the public and businesses. “One is that our powers at the moment are limited only to members of the [accounting] profession,” he said. “ There’s a very good argument that they should be broadened to other directors.”