IBA Rome: Ken Clarke calls for action to tackle corporate excess

Ken Clarke, the former Tory chancellor and justice secretary, has called for a root-and-branch overhaul of corporate governance to address the popular grievances which he believes gave rise to Brexit. Many multinational companies are now ‘self-perpetuating oligarchies determining their own rewards’, he told a lunchtime session of the International Bar Association conference in Rome. Breaking the stranglehold that the Big Four professional services firms hold over the statutory audit of leading corporations should be part of that reform agenda, he said.

Clarke, a noted Europhile on the left of the Conservative party, admitted the 1990s credo of ‘capitalism with a social conscience’ which he embodied had failed too many people.

‘We failed to appreciate that in educated, successful and prosperous meritocracies, about half of the population were being left behind by what they saw as an increasingly out-of-touch elite. A big surge in immigration became the scapegoat. All traditional politicians are crashing in the polls. [In the Brexit poll] people in rust-bucket parts of the UK showed the establishment what they think of them.’

While reiterating his faith in free markets and social liberalism, Clarke said advanced democracies must tackle the ‘abuses and excesses’ of markets. ‘We have to address corporate governance,’ he said. ‘Many major corporations are self-perpetuating oligarchies determining their own rewards. Shareholders are not in control and corporations need to engage with a bigger civil interest.

‘Even with the distribution of rewards generally, the ostentatious vulgarity of the lives of the super-rich causes rage to the redundant steelworker living in a city in Britain, the US or anywhere else. We need to look at how great corporations are run and managed so that they have a broader responsibility than just the return of capital – far removed from greed and madness of the 2008 crisis.’

He added: ’At the moment we are just nibbling at the edges with ideas and most of those ideas are met by ferocious lobbying. Western democracies can’t even get on with addressing unregulated social media publishers, or breaking up the Big Four auditors.’

On Brexit, when questioned on the vexed issue of the Irish border, Clarke lamented that a small number of Labour brexiteers prevented an amendment enabling a customs union. ‘What we need is a customs arrangement and regulatory alignment - if that look likes a bit like a customs union and a single market, I don’t mind. This is the big, short-term thing – everything else can go into the long grass for an indeterminate period, where grown-up civil servants will get into negotiations about what the future relationship with Europe is going to be.'

 The government's Chequers proposal for a deal 'was only drawn up to keep Boris Johnson onside and it only lasted forty-eight hours', said Clarke.