Monday 6 October 2008

UK: directors, accountants and the financial crisis

A couple of articles from today's newspapers deal with two inevitable consequences of the financial crisis: the prospect of litigation and a reassessment of governance structures. The Financial Times newspaper reports the following comments of former Attorney-General Lord Goldsmith: "There will be an avalanche of litigation arising from the credit crisis". Elsewhere, Richard Aitken-Davies, the president of the Association of Chartered Certified Accountants, writing here in the Guardian newspaper, questions the role of directors but has the humility to question the role played by accountants: 

The roles of the chairman and chief executive are ultimately ones of accountability - to shareholders, to customers, to staff and, whether they like it or not, to government, the taxpayer and society at large. But our increasingly well-defined principles of corporate governance have not prevented this crisis. We therefore need to open our thinking to alternative models and, in particular, to the role and effectiveness of independent non-executive directors. If directors ignored bad habits, if they accepted complacency after a prolonged bull market then they should be held accountable. If they have overseen failure, and allowed greed to flourish then they are accountable for this, too. Naivety has also played its part, with well-meaning people succumbing to the seductions of advanced risk management techniques at the expense of common sense. And perhaps we accountants haven't said no enough, either"

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