Mr Smerdon addressed the Jersey International Business School’s annual directors’ convention at the Hotel de France on Wednesday. The day-long event entitled Can Jersey Survive? was staged in association with the Jersey Evening Post and featured eminent speakers from a wide range of industries and nations.
Challenges
Mr Smerdon, a recently retired senior partner in a major law firm with offices in the UK, the United States and Germany, spoke on the challenges facing the finance industry from a regulatory and governance perspective. He warned that the threat of the EU adopting more stringent new rules was made more likely with Hungary due to take over the chairmanship in January. He predicted that Hungary would be keen to show it could ‘get results’.
UK Institute of Directors director general Miles Templeman chaired a question and answer session and asked if the UK approach toward governance of ‘comply or explain’ was under threat from the EU Commission. Mr Smerdon replied: ‘Yes, that really is a threat with Hungary in the chair. The UK’s Financial Reporting Council is really worried.’
The expert, who is also rapporteur to the UK Parliament’s All-Party Corporate Governance Group, said that more stringent regulation could adversely affect Jersey. He said it could lead to a loss of confidence in the future ability of international finance centres to transact with the EU.
‘The last thing Jersey needs is a loss of confidence,’ he said.
Conversely, he said, Jersey was a jurisdiction with good governance practices that could actually increase the sense of confidence in future.
He said that the real question was whether any new EU directive would be legally binding rather than just recommendations.
Mr Smerdon said that the newly appointed EU Commissioner for internal markets, Michal Barnier, wants legal enforceability, but the commission’s policy officer does not.
Mr Smerdon, the author of A Practical Guide to Corporate Governance, said that the regulatory bar was rising around the globe and that debates were taking place
on new frameworks in London, the United States and the EU.
He urged those who attended, who came primarily from the finance industry but also included a number of sixth-formers from Island schools, to read a review of corporate governance in UK banks and other financial industry businesses conducted by Sir David Walker.
Sir David published his report, which was prepared for the then Prime Minister, Gordon Brown, in November last year. Sir David concluded that ‘behaviours mattered’ and that non-executive directors had to be prepared to challenge more.
Mr Smerdon, a member of the American Bar Association sub-committee on international developments in corporate governance, said that a company’s board must include, in clear terms in its annual report, the business model being operated.
