2 Page 1, line 8, at end insert— "(4) In managing its affairs the OFT must have regard to the generally accepted principles of good corporate governance."
The Commons agreed to this amendment with the following amendment—
2A Line 2, leave out from "OFT" to end of line 3 and insert "shall have regard—
to such general guidance concerning the management of the affairs of public bodies as the OFT considers appropriate;
subject to any such guidance and only to the extent that they may reasonably be regarded as applicable in relation to a statutory corporation, to generally accepted principles of good corporate governance."
Lord Sainsbury of Turville (Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry; Labour)
Amendment No. 2A accepts the principle of the Lords amendment, that the OFT should have regard to the generally accepted principles of good corporate governance in its affairs. However, the Commons amendment makes two important changes. First, it ensures that the OFT should have an overriding regard for general guidance concerning the management of the affairs of public bodies. Secondly, it ensures that the OFT will have regard only to the principles of good corporate governance which may be reasonably regarded as being applicable to it. Perhaps I may deal with each of these.
Your Lordships' amendment would not allow the OFT to take prior account of guidance specifically aimed at public bodies. I am not surprised that the Conservatives are unable to understand this distinction, but I find it amazing that the Liberal Democrats should be unable to understand that a public body should take account of public concerns. The OFT will not be a company, and it cannot be right that principles aimed at such companies should take precedence for the OFT over guidance, rules and procedures for public bodies; for example, Treasury rules on public accounting. Additionally, the management of the government department of the OFT will be subject to public law considerations; for example, its decisions could be referred to the Parliamentary Commissioner for Administration—the Ombudsman—and/or for judicial review. Companies are not subject to those restraints.
Secondly, many of the principles of good corporate governance are aimed at business practices which do not have obvious equivalents in government. The OFT will be a non-ministerial government department— a public body—not a company or commercial organisation. Perhaps I may give some examples to illustrate how corporate governance principles do not necessarily relate to public bodies.
The code contains a section devoted to relations with shareholders covering the dialogue between the company and institutional shareholders, the use of annual general meetings and the counting of votes at such meetings. The OFT has no shareholders and so the section is irrelevant to it.
The code also recommends that all directors should be subject to election by shareholders at the first opportunity after their appointment and to re-election thereafter at intervals of no more than three years. Again, I make the point that OFT has no shareholders. Non-executive appointments to the OFT will be for specified terms of no more than five years under the Bill and will be made following Nolan procedures. Under these procedures, reappointment is a matter for Ministers following an assessment of the performance of the non-executive and second reappointments are not normally permitted.
So a quite different system of checks is in place for appointments to the OFT than would apply for a listed company. Another section of the code is concerned with directors' remuneration; both the policy of performance-related pay and the mechanics of remuneration committees. Again, the practice in public bodies is subject to different checks. The salaries of non-executive members of the OFT will be determined by the Secretary of State, while any civil servants serving as executive members of the OFT will have the salary determined in the usual way for OFT civil servants.
I believe that Commons Amendment No. 2A reflects the will of this House that the OFT should have regard to the principles of good corporate governance, but achieves this in a way which is fully appropriate to the OFT as a public body. To revert to your Lordships' amendment would be to impose a set of principles on the OFT which are not entirely relevant to a public body and which do not recognise the existence of other guidance and procedures directed at public authorities. I do not think that would be right. I beg to move.