MPs air concerns over Dingemans appointment to chair FRC
23 Jul 2019
Simon Dingemans has been officially appointed as chair of the Financial Reporting Council (FRC) after an approval hearing in front of the Business, Energy and Industrial Strategy (BEIS) committee of MPs, who have urged him to be more challenging
23 Jul 2019
The confirmation of the appointment by the Department for Business, Industry Strategy and Enterprise (BEIS) comes as the FRC is set to be overhauled with a new management team as part of its transition into a new audit regulator, the Audit, Reporting and Governance Authority (ARGA).
While the committee endorsed the appointment, it noted concerns about some of the views Dingemans expressed during his appearance before them.
MPs urged him to prioritise audit reform and how the regulator handles whistleblowers, although the committee was cautious about the appointment, particularly after Dingemans' appointment hearing.
At the BEIS hearing last week, MPs put Dingemans under pressure to say whether he supported the Competition and Markets Authority (CMA) proposals, including recommendations for an operational split at Big Four firms, joint audits and shared audits, but he would not be pushed to respond on his particular views on the different core issues.
Dingemans told MPs: ‘I think that the proposals put forward by the CMA were just that, and they made recommendations to the secretary of state. It’s a bit early to land on one piece of that puzzle. At this stage I am still listening to the different perspectives.
'It is a bit early to give you a view at this stage. I would like to be able to take up the role and talk to the FRC and be able to benefit from some of their experiences.'
In terms of the wider need for reform, Dingemans said: 'In the current environment, there is a very different appetite for change and very fundamental change to audit, and that is how I think about recommendations in Sir John’s [Brydon] report against that background – the ARGA needs powers and teeth, and it has to be prepared to use these powers to serve the needs of end users and most of all to change the culture of the organisation, and to make it more proactive.'
MPs also expressed concerns about potential conflict and whether he saw his former role as chairman of the influential 100Group of top listed companies, which was strongly opposed to CMA reforms, as a problem.
Dingemans, who was chair of the 100Group from 2012-14 when he was chief financial officer of GlaxoSmithKline rejected this, stating that 'the 100Group represented many different views. I respect their opinions, but there’s a range of views'.
He was also questioned about his commitment to the role of chairman and how many days he expected to spend at the FRC to lead the transition to the ARGA. The role was advertised for one to three days per week.
'In the beginning I will take a significant amount of time – I will have to judge the amount of input required going forward.'
When asked what other roles he was considering, he told MPs: 'The sort of roles I am talking about are investing roles, private equity and other private companies. I am talking to other people at this moment but nothing is definite. In the short term I may take on some other roles, but I am very clear what the priority is [at FRC].'
Although the BEIS committee approved the appointment, the report warned: ‘Based on Mr Dingemans’ evidence to us, we fear that this could be a missed opportunity to deliver the radical reform needed to create a regulator ready to challenge and correct the weaknesses exposed by recent failures in the sector.
‘We urge Mr Dingemans to be proactive in embracing the reforms that this committee, the Competition and Markets Authority and the Kingman review have identified. Our committee will continue to be actively engaged in the need for reform in the audit sector and we look forward to those reforms being put in place as a matter of urgency.’
Rachel Reeves, BEIS select committee chair, said: ‘This is the most important pre-appointment hearing that the committee has undertaken in this parliament. Our inquiry on Carillion and on the future of audit highlighted in stark terms the weaknesses which exist in audit and the pressing need for a regulator which is independent, pro-active and tough.
‘There is no doubt that radical reform will be necessary to transform the FRC’s successor body into the regulator which businesses, investors, workers and the public can rely on.
‘We want the new chair of the Financial Reporting Council to show the independence and challenge vital to deliver a regulator ready and willing to correct the problems in the audit sector. As a committee, we will continue to take a keen interest in audit reform and monitor the FRC’s role in delivering the changes needed to help avoid future accounting and corporate scandals.’
Report by Sara White and Pat Sweet | 23-07-2019