A group representing many of the world's top investors has today called on the government to create a new body which has "real teeth" to punish directors who fail to meet their duties.
The Investment Association, whose members collectively invest more than £5 trillion, said such a body would ideally combine the powers of multiple agencies to fine or even disqualify directors in the case of negligence across a wide range of issues, in its response to the government's consultation on corporate governance, which closed this week.
Andrew Ninian, IA director of stewardship and corporate governance, said: “The current system of sanctions is fragmented between many different authorities, and often directors are only sanctioned as a result of investigations after a company goes into insolvency.
"By uniting the powers and responsibilities, we would be giving real teeth to a single body who could then hold any directors to account for being negligent of their duties.”
Such a body would not require new legislation on company directors' responsibilities, but would give one body the authority to hold directors to account.
The calls for new powers come after prominent cases where directors have faced widespread criticism but little in the way of material punishment after company collapses. Sir Philip Green received particular censure for his sale of BHS to Dominic Chappell, who MPs said was unfit to run a large company, prompting the government to turn its focus on corporate governance.
Powers to punish directors are currently spread between different regulators. The Insolvency Service has the power to investigate directors if they receive evidence of misconduct which would make them unfit to manage a company, which can result in disqualification orders by the courts.
HM Revenue and Customs may pursue directors for tax personally in some cases, while the Pensions Regulator can intervene in pension funds if employers' actions could dent workers' retirement pots.
“It is essential that directors of companies are held accountable and appropriately sanctioned when they negligently fail to meet their duties," Ninian said. "Recent high-profile examples have clearly demonstrated that the current framework for sanctioning needs re-thinking."