The European Union is currently debating how to promote the equal participation of women and men in decision-making at all levels and in all fields. Given that gender equality is enshrined in Article 23 of the Charter of Fundamental Rights of the European Union, progress is slow and the de facto gender equality has yet still to be attained.
Encouraging women into senior management positions is a crucial part of the global drive to improve equality between men and women. In an environment with a shortage of independent non-executive directors with appropriate skills, women are still a largely untapped source of talent for boards. This is the position of ACCA (the Association of Chartered Certified Accountants), which welcomed the endorsement by EU ministers in charge of employment and social affairs of a renewed European pact for gender equality , which is aimed at increasing women’s presence in decision-making bodies. As a first step, the global accountancy body wants to see transparent diversity reporting by companies placed at the heart of these efforts: companies should adopt policies on boardroom diversity and report annually on progress made.
There is a need for greater diversity, not only in terms of gender, but also in background and experience. Transparency is the key to overcoming gender inequalities in companies – not quotas. At this stage, new regulation on this issue should not be the route to go. To allow for greater transparency, part of the solution would entail companies to routinely report gender-detailed HR data for all staff, including board members. Organisations should also build support programmes and provide access to role models, networks and mentors to help women break down the boardroom doors.
Making appointments to a board of directors of a public company is a very serious business and should be taken seriously both by the company and the individual director. It must ultimately be about assembling the right collection of skills and experience. Company law imposes extensive personal responsibilities on individual directors. The cause of diversity would not be met by lowering of standards.
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The European Commission is currently undertaking a wide-ranging analysis of the nature of the pension challenges which face Europe through a public consultation entitled Towards adequate, sustainable and safe European pension systems.
These challenges are inextricably linked to issues in the wider economy and wider society and should be tackled through a joined-up, strategic approach at government level which would takes into account all the relevant dynamics and tries to forge a pragmatic way forward. This would involve communicating the message to all concerned, including individual citizens, that pension provision can no longer be taken for granted and needs to be planned and financed.
The EU Commission suggests that the three elements of the strategy agreed at the 2001 Stockholm Council, namely to reduce public debt, raise employment rates and productivity and reform pension, health care and long-term care systems should be linked, and this seems the right way to go. It is clear that some member states’ budget deficits are unsustainable in the long term. If they continue, they will make it increasingly difficult to pay for pensions.
The ability of any pension scheme, whether private or public, to fund retirement benefits will depend to a great extent on the participation of its citizens in the workforce. The EU’s high unemployment rates, which exceeds 40% among young people in some EU countries, exacerbates the long-term financial pressures on governments, and increases the prospect of pensioner poverty in the future. This point is echoed in ACCA (the Association of Chartered Certified Accountants) ’ response to the consultation, in which the global accountancy body stresses that the EU strategy on pensions must be interlinked with efforts to create jobs. For ACCA, it is also essential that all unjustifiable legal and practical barriers to the participation of older workers in the workforce are dismantled, otherwise those workers will be forced to rely on state welfare benefits where those are available. Statutory intervention should however not be the only means for ensuring it and employers should be encouraged – rather than obliged – to make reasonable adjustments to premises or working practices to cater for the needs of older worker and to value their participation. This process will of course necessitate a certain degree of cultural and attitude change on the part of employers and their younger workforces, but efforts should be concentrated on persuading employers of the business case for that change. collective schemes, which have a great potential for lowering scheme costs – and legal guarantees for supplementary pension benefits where an employer has become insolvent could also -under certain conditions – play a vital role.
It is also vital that people are suitably reassured about the safety and security of the assets held by their pension fund. Gaps in regulatory protections must be addressed – especially in the case of pension providers operating across-border. But any additional regulation of schemes must be very careful not to add to the disincentives which already exist for employers and, on the contrary, should strive to encourage the continuing involvement of employers in the framework of supplementary pension provision.
Confidence could also be engendered through risk sharing: employers should be encouraged to offer
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The European Commission is currently analysing the impacts, costs and benefits stemming from the so called Transparency Directive. The EU executive is working towards its possible improvement, namely in the field of the attractiveness of regulated capital markets for smaller listed companies, holdings of voting rights and the inefficient implementation of the Directive due to diverging national rules. The availability of reliable and transparent information for stakeholders in small businesses is vital to encourage investment in and trade with such entities, but the modernisation of the transparency regime for listed companies must be consistent to bring the goal of a true single European market closer to realisation.
If the Commission’s desire to improve access to financial information for investors while reducing the burden on issuers of securities -particularly for small and medium sized ones is laudable, exempting smaller issuers from the requirement to publish quarterly information would lead to the opposite result and reduce transparency. The financial crisis has shown that they can be more risky than larger issuers and therefore merit the highest level of scrutiny and regulatory control. In this vein, a global accountancy body – ACCA (the association of Chartered Certified Accountants)- in its response to the Public consultation stresses that, as observed in the context of the abolition of audit and accounting requirements for small, medium and micro, the absence of pan-European legislation does not necessarily lead to simplification or a reduction in local administrative burdens, and is even likely to result in the creation of domestic regimes which are incompatible with each other, hence acting as a barrier to cross border transactions.
It is inconsistency, rather than the absence of guiding regulatory principles that causes the problems. The minimum harmonisation approach of the Transparency Directive has the same effect, as individual Member States can introduce (or retain) listing rules that are more onerous on issuers than required by the Directive. If investors are to have confidence to invest in businesses outside their home state then they must not only have confidence on the accuracy of the information, but must also feel comfortable with the presentation and interpretation of that information.
ACCA also warns against a definition of small listed companies based upon local factors in stressing that investors would see not simply two different types of issuer (SMILEs and “large” issuers), but up to 54 different types, with the boundary between small and large set a t a different level for each of the 27 member states.
In the context of investor requirements to notify issuers of significant interest, this level of complexity would be counterproductive, and risk increasing the perception of a fragmented European investment market from non- EU investors’ perspective
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In the aftermath of the financial crisis, young finance professionals of the 21st century – in the EU but also worldwide – are seeking increasingly aspirational and dynamic career paths, both inside and outside traditional mainstream finance careers. Modern graduates have a clear vision for their professional lives and are demanding more from employers – also in terms of remuneration- as they pursue their primary goals.
This is confirmed by a new report entitled Generation Y: Realising the Potential from the Association of Chartered Certified Accountants (ACCA) and Mercer, the human resource consultancy, which founds that remuneration is important to this age group and they seek out competitive packages. But they also want a good contractual package –money, work-life balance, and working for an attractive brand that reflects their own values. This is the case within both mainstream finance professions such as accountancy, as well as alternative careers in the sector.
Up to half of young professionals questioned said they harbour concerns over training provision and the career development opportunities available to them. Increasingly, human capital will be the primary source of competitive differentiation. Its value will be created by people, ideas and the brand of the organization. This means that unless employers make adequate provision in these areas, they could end-up struggling to hold on to the brightest and best within their workforce. Employers need to put career development at the heart of their proposition to make them attractive to Generation Y. Contrary to popular perception, the survey shows this is a generation who value job security but are prepared to leave if career promises are not fulfilled.
Managing the career expectations, thinking creatively about how they can offer roles and greater career path variation and being transparent about career development will hence be key to delivering on the career promise.
This report should provide a wake up call to employers of finance professionals to embrace the career aspirations of the youngest generation and offer dynamic career routes that capitalise on their finance skills. If employers get this wrong, there’s a significant risk of losing future talent, particularly if global economic conditions start improving.
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Since the financial crisis, the banking sector has been affected by issues linked to accounting policies and standards. These include challenges associated with fair value accounting, pro-cyclicality and comparability of numbers, as well as performance in financial reports. It is reassuring that after the G20 request to international standard-setters in April 2009 to clarify accounting rules, many of the issues raised have started to be addressed, but it is too soon to be complacent.
The European Union adopted the IAS-IFRS standards including IAS39 -the standard on the recognition and measurement of financial instruments – as part of the move to IFRS by listed companies from 2005. In Autumn 2009, the International Accounting Standards Board (IASB) published the first part of IFRS9 a new standard to replace IAS 39. This still provides for a “mixed model” – that is some financial assets to be shown at historical cost and some to be at fair value – but a simpler version. However IFRS9 has been seen by some to place too much emphasis upon valuing assets based on market prices.
IASB has also published a proposal for loan loss and other impairments of debts, when at historical cost) while proposals are still expected later this year on the measurement of liabilities and on hedge accounting.
The adoption of IFRS9 by Europe is clearly a crucial question for the future of the IFRS framework as a whole. In this context, a recent roundtable – organised by ACCA (the Association of Certified Chartered Accountants) and Barclays in Brussels – entitled “New IFRS9: Reporting of financial instruments made simpler?” considered if the new standard will align sufficiently financial reporting with the business model and should it be the case, what still needs to be done.
The European Commission has decided to put a hold on transposing the rule into Community law until the remaining sections of IFRS9 are released, urging the IASB to strike the right balance between the two different accounting models, the reporting assets at fair value (market prices) and (amortised) cost price.
There is no sign so far of an early endorsement, the whole process will take longer than expected, especially since IFRS 9 proposal are a part of an even bigger set of expected changes.
Even though no major disagreement amongst stakeholders exists on the direction standards should be changed, there are still a lot of details to be filled in. Improvements have been achieved but the seriousness of the remaining concerns might be a further obstacle. In addition on the convergence issue, no firm proposals have yet been published by FASB, the US standard setter in this regard, though their deliberations have favoured a model where most financial instruments would be at fair value. This is expected to lead to further difficulties.
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The financial crisis that began in 2007 has put the spotlight firmly on how corporates, especially those in the financial sector, have addressed issues such as risk, reward, governance and ethics. The difficulty lies in the balance to be struck. Now that the global economy appears to be climbing gradually out of downturn, it is timely to examine what needs to be done to try to prevent a recurrence of the problems we have seen in recent years.
This topical issue was the corner stone of a lively debate – led by Dr Kay Swinburne, MEP, Coordinator of the ECON and CRIS Committees in the European Parliament, Eric Ducoulombier, Deputy Head of the Unit Company Law, Corporate Governance and Financial Crime at DG MARKT, Willem J.L.Calkoen, lawyer at NautahDutilh and Paul Moxey, ACCA head of corporate governance & risk management – during an ACCA (the Association of Chartered Accountants) breakfast meeting entitled “Corporate Governance: How to Balance Ethics, Risk and Entrepreneurship?” that took place recently.
The basis for discussions originated in the recently published European Commission’s green paper – that looks at how corporate governance at financial firms could provide the necessary checks and balances to prevent bankers from taking the kinds of excessive risk that led to the crisis- and a new ACCA report entitled ‘Risk and reward – tempering the pursuit of profit’, which examines where the financial system went wrong prior to the financial crisis, with a massive failure of ‘people risk’ being identified.
The financial crisis has highlighted serious ethical failings; businesses of all kinds, including the banks, have been increasingly policed by reams of rules and regulations but we have seen during the crisis that, despite all these regulatory requirements, or perhaps because of them, individuals exploited gaps. A strong commitment to ethical business conduct on the part of directors and key staff is a strong line of defence against reputational damage and should be an essential part of any risk management strategy. Institutions and companies need to consider not only risk at the individual company/shareholders level, but also their impact upon the wider economy and society at large.
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The Belgian government was left in chaos in April after Belgium’s King Albert II accepted the resignation of the Flemish Christian democrat and Prime Minister, Yves Leterme – Leterme’s third resignation since July 2008. This was the latest installation in the long-term power struggle between the country’s French-speaking Walloons and Flemish-speaking majority.
Leterme’s five-month old coalition government, consisting of five parties from centre left and centre right (Dutch-speaking and Francophone centrists and liberals), collapsed after the centre-right Flemish liberal party (Open VLD) withdrew from the coalition, stating that it had lost confidence in the Government’s ability to settle a dispute over rights for French speakers relating to electoral boundaries in the constituency of Brussels-Halle-Vilvoorde (BHV) which allegedly give special rights to Walloons living near Brussels.
These are crucial times for Belgium, which is suffering serious economic as well as political problems. The latest events risk threatening its upcoming stint in the rotating presidency of the EU, to begin on July 1. Indeed the king has commented that a political crisis would harm Belgium’s status in Europe and hinder its economic prospects as it begins to emerge from this crisis. ACCA (the Association of Chartered Certified Accountants) is concerned that, should Belgian experience a deep political crisis, the country – with its over 100% GDP debt- could risk finding itself in a similar position to Greece. At a time when real leadership is needed in the EU, domestic troubles in Belgium could indeed potentially deprive the EU Council of an influential presidency.
The European Commission has reassured both the Belgians and other EU members states by commenting that Belgium’s political crisis and potential early elections will not hinder its presidency of the EU, but it would like to avoid the recurrence of events in the early 2009; the disintegration of the Czech government while in EU presidency role caused havoc in Brussels and forced them to abandon much of the presidency agenda. The creation of a permanent EU president –Mr Van Rompuy, who is coincidentally Belgian himself- will hopefully prevent Belgium’s difficulties to too negatively impact the EU agenda’s priorities this time, but this remains a test case.
Although Leterme tendered his resignation, he has been asked to carry on in a caretaker role until an election can take place, in order to maintain stability. New elections in June, probably on 13, now seem inevitable. This would give Belgium a chance of forming a new government before it takes over the EU presidency and of an appropriate government representative being able to attend the EU summit on June 17 and 18.
However, having a new coalition up and running by the end of June is not a foregone conclusion – it took nine months to form a government after the last general election in 2007.
Even if Belgium does manage to find a resolution and begin to build stability both politically and economically to sustain itself in Europe, this issue will rear its head again. Especially in a country where there has not been a national political party since the 1970s, a longer term solution needs to be considered to bridge the gap between the two main linguistic communities in order to ensure the survival of Belgium as one country.
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On 25th March, the European Parliament’s Financial, Economic and Social Crisis (ECON) Committee met to discuss the feasibility of an EU-wide financial transaction tax (FTT), two weeks after MEPs voted 536-80 in favour of such a measure.
Today, in the aftermath of the banking crisis and the anger it has caused, such a levy has become a byword for retribution. But the concept has existed for decades; John Maynard Keynes first conceived of a transaction tax in 1936 to abate the damaging effect of speculation in currency markets. His self confessed disciple James Tobin developed the idea in 1972, at the inception of computer-driven financial activity. A levy of 0.5% on each exchange would, he believed, “throw some sand in the wheels of international money markets”.
Prominent EU leaders, including UK Prime Minister Gordon Brown, President Sarkozy of France and German Chancellor Angele Merkel, have frequently championed the revenue-raising potential of a FTT. In fact, the so-called Tobin’s tax, from which the idea is derived even if the proposed FTT differs slightly, was originally intended only to curb volatility – so the idea which was mooted at November’s G20 summit might be better described as a hybrid of the high-profile ‘Robin Hood’ tax, with which it is often conflated. Austrian economist Stephan Schulmeister told the ECON Committee that just a levy of just 0.05% – a tenth of what Tobin originally suggested – would raise 300bn euros, which could be used to pay off national debts, ensure Europe’s food security, tackle climate change, and perhaps increase development aid.
Yet while they appeared poised with fistfuls of metaphorical sand last year, enthusiasm seems to have waned among EU leaders, as opposition from the US increasingly shifts the debate towards a levy on bank profits. International Monetary Fund Managing Director, Dominique Strauss-Kahn, has warned that because financial instruments are far more complex now than in 1972, a transaction tax would be complex to devise – and easy to avoid. He is nevertheless expected to propose a levy on the banking sector when he meets G20 finance ministers in Washington this month. However, since taxation remains a nationally reserved power, moves towards pan-European coordination could be met with fierce resistance.
Council President-in-turn José Luis Rodríguez Zapatero has said Europe should take the initiative on transaction taxes at future global forums, but is reluctant to pursue any path alone. ACCA (the Association of Chartered Certified Accountants) shares the agreed view that global coordination would be essential for a successful implementation of a financial transaction levy, should decision makers decide to reach agreement on such a proposal. A report recently published by the EU Commission assessing the main sources of “innovative financing” seems to suggest however that actions at EU level alone should not be discarded. Now, as the future of a European FTT hangs in the balance, the pressure is on for MEPs to win round their leaders before the June’s G20 summit in Toronto.
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