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Jim Armitage: Red tape madness brings headaches for City’s directors

City firms are look into The Financial Reporting Council’s latest UK governance code: PA
City firms are look into The Financial Reporting Council’s latest UK governance code: PA

At a recent City dinner, the five FTSE-100 directors present were asked who would consider becoming a non-executive director at a bank.

All five looked down into their dinner plates: not on your Nellie.

The burdens put on NEDs at stock market-listed companies these days are so weighty that, for many of our most talented and enterprising business brains, it’s just not worth it.

Banking is particularly bad because you’re laying yourself open to being held personally liable if anything goes wrong. For the sake of £60,000 or £70,000 a year, the successful business brains best qualified for these roles just don’t see the point.

But it’s not just banking: all non-executive jobs these days carry burdens and workloads that most business people don’t have time for.

Today, thud. Another list of new corporate governance rules lands on the chairman’s desk. This time it’s the Financial Reporting Council’s UK governance code.

It all looks like common sense; more recognition for whistleblowers, more consultation with ordinary employees, more “formal and rigorous” evaluation of directors.

But, on top of what non-execs are already asked to do, it gives them yet more reasons to pass when job offers come up.

Nobody wants to go back to the old gravy train days, where a NED role was a cosy sinecure involving the occasional long lunch at Mosimann’s. The financial crisis and scandals such as Carillion have shown how bad directors need strong non-execs to rein them in.

Nobody benefits, though, if we tangle up these roles in so much red tape and liability that you have to pay a fortune to tempt anyone decent to do them.

Surely it’s time to go back to common sense instead.

Farmer’s boy to UK fintech star

No such regulatory burdens for Lex Greensill. He’s the founder of London’s latest unicorn, the eponymous invoice factoring business Greensill.

The son of Aussie farmers, Lex’s father didn’t have the cashflow to put him through college because supermarkets took so long to pay for his produce.

He finally did work his way to business school, where he dreamed up the idea of cheaply providing credit to SMEs, such as his dad’s, based on invoices from big suppliers.

Such “factoring” has been around forever, but Greensill’s tech automates the work of checking SMEs’ invoices are kosher. His 200 staff in Covent Garden do what it would have taken 10,000 to do at a traditional firm. Those savings mean cheaper credit for customers.

Having just pulled in $250 million finance from General Atlantic, there’s no need for Greensill to list on the stock market, or suffer the welter of corporate governance that entails.

His business is worth $1.6 billion already. At this rate, it won’t be long before it’s worth three times that much. Who needs the stock market?