The Institute of Directors have today questioned new proposals from the FCA and PRA which would extend the Senior Managers Regime to apply to non-executive directors. Dr Roger Barker, Director of Corporate Governance and Professional Standards, said:
“The basis behind today’s joint consultation by the FCA and PRA, on revising their approach to non-executive directors, is both unrealistic and unhelpful.
“Whilst we accept that criminal liability should exist for chief executives and senior executive directors who have personally taken reckless decisions, we do have severe reservations about bringing senior non-executive directors into the ambit of criminal liability.
“A non-executive director (NED) does not have access to the same level of information as an executive director, and does not have the same individual decision-making powers. Moreover, their contribution to boardroom decision-making is not made in isolation. Therefore, it would be quite something for the regulator to be able to identify individual criminal culpability of a part-time non-executive director having led to the collapse of a major bank. Indeed, one has to ask what this implies for the principle of collective responsibility.
“We also have severe concerns about whether such a move could have the unintended consequences of shrinking the available pool of experienced candidates willing to sit on the board of a bank. At the same time, the proposals will make very little practical difference in encouraging more effective boardroom oversight. We shall respond to the proposals in more detail but for now it would appear that the PRA and FCA may have gone too far.”