Cable planning compensation move

Fraudulent or negligent directors could be forced to compensate creditors, under plans expected to be outlined by Vince Cable.

The Business Secretary will announce proposals to boost transparency and trust in British business in a speech to the London Stock Exchange on Monday.

He will float a range of options for discussion including making errant bosses liable for losses, and disqualifying directors who are already banned outside of the UK. Mr Cable will also raise making ensuring the safety and stability of firms the main responsibility of bank directors - an idea suggested by the parliamentary commission on banking standards.

The Liberal Democrat minister said the failure to punish executives in the wake of the banking crisis had undermined public faith in regulation. He told the Sunday Telegraph: "I think the public are a little baffled by the current regime. There is an issue around the people who used to run Lloyds and RBS, and there is a worry about how the system operates."

People who operate "rogue companies" or are involved in "serial failure" should be punished through disqualification, the Cabinet minister added. However, he indicated that he wanted any new measures to be proportionate. He said: "We don't want to get into a situation where we're penalising good business people who take risks but whose business fails for whatever reason."

Tougher rules are not expected to be restrospective, despite persistent calls for action against figures such as former RBS chief executive Fred Goodwin. There also appears little chance that final proposals will reach the statute books before the 2015 general election.

Shadow business secretary Chuka Umunna said Labour had been leading the charge for a "more responsible capitalism".

Matthew Fell, CBI director for competitive markets, said: "We support the broad drive for greater trust and transparency to promote more responsible capitalism."

But he added: "Any changes to switch directors' primary duty away from the shareholder would be a significant shift in company law, which could erode companies' investment appeal. We don't want to end up with a pick-and-mix approach to corporate governance standards for different sectors of the economy.

"This would also throw up lots of practical issues, for example what rules would apply to organisations which run banks as part of their larger group?"

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