Firm directors ‘swamped by red tape’

COMPANY directors are being swamped by over-regulation and red tape, according to the head of the country’s third largest bank.

Ulster Bank chief executive Cormac McCarthy said the obligations on company directors, particularly in small firms, have become onerous and many people will be turned off by the offer of a non-executive directorship because of them.

He said he was concerned about changes to the Companies Act, which would mean that directors would have sign off on their accounts saying they are compliant with all aspects of the law.

“Boards are spending increasing amounts of time debating governance issues often to the detriment of the business needs for real strategic debate. Good people are becoming more reluctant to join boards as non-executive directors because of the weight of governance.”

Speaking at the Institute of Directors’ monthly lunch yesterday, Mr McCarthy said: “I think a huge amount of good has come of out of the recent much-needed changes in the governance environment. Joining a board is no longer seen as a perk accruing as part of one’s career rites of passage involving long lunch and exotic trips.

“Boards and their members must take and be seen to take responsibility, both for triumph and disaster and work diligently to ensure that the interests and shareholders are rightly represented. But we shouldn’t overdo it.”

He added: “Well-run companies should see much of the new governance requirements as no more than copperfastening existing strong policies and procedures.”

Following the takeover of First Active last year by Ulster Bank’s parent (the Royal Bank of Scotland), the combined entity would look to take on AIB and Bank of Ireland, added Mr McCarthy.

“Whilst the acquisition of First Active has further consolidated the position of the Ulster Bank group as the third-largest player in the Irish financial services industry, when has the RBS Group ever been satisfied with being third?”