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The Chairman of Committees: My Lords, as Amendment No. 9 is also being spoken to, I must point out to your Lordships that there is a mistake in that amendment. Where it reads, "page 228, line 24", it should read, "page 228, line 28".
Lord Alexander of Weedon: My Lords, if no one else rises--if my noble friend Lord Saatchi would like to rise now I will give way instantly--perhaps I may briefly support the amendment. I supported the spirit of the amendment at Second Reading and also in Committee.
I do not believe that this amendment is about whether or not there should be a distinction because the FSA has no shareholders whereas ordinary companies do; it is about a balance of fairness; it is about the confidence of the consumer and those who work in the industry; and it is about efficiency.
I see the FSA as having a vast role, greater than most public companies. Most public companies now need both a full-time chairman and a chief executive. The chairman leads the board; helps shape the policy; has what is sometimes called an ambassadorial role; has, and we know this is important in the case of the FSA, an international role and is obviously key to the taking of certain important decisions. The chief executive is largely operational, implementing strategy and policy and dealing with staffing and administrative issues.
When I was, for three years, one of the two non-executive deputy chairmen of the Securities and Investment Board, I saw just such a system in action under the executive chairmanship of Sir Andrew Large, but also with a chief executive. I had absolutely no doubt from my perception as a board member that there were two jobs that needed doing, and that each helped to balance the way in which the other discharged his responsibilities. In the two-and-a-half years when I was chairman of the Takeover Panel, we had an admirable director general, but inevitably he
I am conscious that the FSA is not only very powerful, but it is also seen to be immensely powerful. There are concerns about its accountability and whether it will become an over-mighty regulator. I see checks and balances as crucial. I believe it is vital to have a strong board with a majority of non-executives. I believe also that it is important to have a separate chairman and chief executive. We know that we attach the greatest importance to the FSA commanding the confidence of the consumer. But it must also command the confidence of the industry and I believe this is the best way to achieve it.
Lord Borrie: My Lords, the amendments now before us are a much more sophisticated set than those which dealt with a similar topic of governance and dividing the responsibilities of chairman and chief executive than were before us in Committee. They also show that those who tabled the amendments have carefully read Schedule 1, which deals with the appointment of chairmen on the one hand and the appointment of a governing body on the other, the latter to have a majority of non-executives, which, from what the noble Lord, Lord Alexander, said, is something we generally approve of, but also to have executive members.
Schedule 1 has obviously been carefully studied by those who have added their name to the amendment. However, a theme which remains unchanged from the previous occasion we discussed the matter is that best practice and the normal running of the authority comprises one person as chairman and another person as chief executive. There is some slight backtracking from that--perhaps this results from the position adopted by Mr Howard Davies and the Government--namely, that from time to time the two roles should be permitted to be combined in the one person.
What I find rather difficult to understand--after a careful reading of Schedule 1--is why these more sophisticated amendments should be considered any more helpful and useful today than was the case in Committee. Schedule 1, as drafted, provides for the appointment of chairmen and of a governing body which will have a number of executives on it. No one has said either today or on the previous occasion that one of those executives could not be termed the "chief executive" and be known as such internally and externally.
Therefore, I am still rather uncertain as regards what is sought to be achieved here. However, I recognise that there has been much briefing of journalists, particularly the excellent people from the Financial Times. I recognise that there is much "macho" activity, if I may put it that way, on the part of those on Opposition Front Benches who are
Baroness O'Cathain: My Lords, I appreciate that I am not on the Front Bench, but some of us on these Benches do not take a "macho" approach to this matter. On the basis of experience and expertise, one feels that the ideal situation in any large organisation is to split the roles of chairman and chief executive. All the reasons enumerated by my noble friend Lord Alexander hold good, but, moreover, sometimes an organisation--the FSA probably falls into this category--can be subjected to great fire from all kinds of people. Splitting the roles of chairman and chief executive provides a comfort factor for the chief executive and for the board as a whole. That has worked, and there is no reason at all why it should not work in the context we are discussing. I believe that it would benefit the FSA to split the roles.
Lord Fraser of Carmyllie: My Lords, I support the amendments spoken to by the noble Lord, Lord Newby. When the noble Lord, Lord Borrie, congratulated someone on "spinning" in the press, I thought that he was about to deliver a fulsome tribute to Mr Howard Davies for the effective way in which he managed to put across his position on the issue we are discussing. I agree with the noble Lord that Schedule 1 permits one to set up an arrangement whereby the positions of chairman and chief executive are split. It is quite clear from the Joint Committee's report that our view was that Howard Davies should retain that combined role for as long as he remains in office. We had no doubt about that and we complimented him on what he had achieved in bringing together the various different bodies that now make up the FSA. I do not depart from those compliments now. We are not talking about his tenure of office, but about what will happen when that ends.
The noble Lord, Lord Borrie, is correct to say that what we are discussing is permitted under Schedule 1. However, I understand clearly from everything that Mr Howard Davies and others have written that when his tenure of office ends, the combination of the role of chairman and chief executive ought to be the norm. Time after time the parallel with the Governor of the Bank of England is drawn. I believe that it is undesirable that the chairman and chief executive of the FSA should be so combined in perpetuity. It is far better that they should be separated. This is in no sense--perhaps this is unusual--a criticism of the FSA itself. From time to time I visit the FSA. Every time I visit it seems to me that the FSA demonstrates a greater sureness of touch than on previous occasions. That is my strong personal view, but I appreciate that it may not be universally held.
The model that the Government have constructed for the authority--this powerful regulator--is that of a company with a board of directors. I believe it is appropriate that best practice should be followed in this matter. The noble Lord, Lord Newby, emphasised his other amendments in the group we are discussing. I draw particular attention to the desirability of accepting Amendment No. 16. I believe that the Government ought to be prepared to accept that amendment--if they are not prepared to accept anything else--as it does not impose a requirement on the FSA to separate these functions for all time. It requires the FSA to consider the situation when it next appoints a chairman or chief executive and to reach a decision on whether or not the two posts should be combined or separated. Amendment No. 16 states that the FSA should reach that decision in accordance with the provisions of the combined code on corporate governance,
If, at the end of the tenure of office of Howard Davies, the FSA reaches the conclusion that the posts should be combined, so be it. But at least at that time those who are concerned about the FSA will be in a position to understand exactly why it is that that whole board of directors, including a majority of non-executive directors, has come to the view that the combination should persist into the future. That does not seem to me to be an unacceptable or unworthy burden to place on the FSA. I believe that if we were to do that, the confidence which I have in the FSA--this confidence may not be as widely held as the FSA might like--would be considerably enhanced.
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