Jan du Plessis is quick to offer a withering assessment of the City of London’s place in the world.
“It’s clear that over the last five, 10 and 15 years, we have been declining as a financial capital in almost any metric,” he says during an interview at the Financial Reporting Council, which he now chairs. “Certainly relative to the US.”
The City grandee blames various factors for the decline: a cultural objection to high executive pay, the unwanted influence of proxy agencies, and a reluctance to embrace change. As for Brexit, he declines to comment. “You’re setting a trap,” he smiles.
After a career that included stints as chairman of Rio Tinto Plc, SAB Miller and BT Group Plc, Du Plessis took over Britain’s accounting watchdog last year following a series of scandals that left investors nursing heavy losses.
The mandate also includes a crucial review of the UK’s corporate governance code, which guides boards on issues such as remuneration and shareholder relations. The role has grown in importance as London fights for its future post-Brexit, with companies such as Flutter Entertainment Plc, CRH Plc and ARM Ltd. choosing to sell shares in New York amid fears of an exodus.
The City still has a “peculiarly, quite narrow British way of life,” Du Plessis says, bemoaning a long-standing objection to dual share-class structures. He points to Denmark’s Novo Nordisk A/S, which has become the second biggest company in Europe thanks to its blockbuster obesity drug.
A charitable foundation has kept a controlling stake in Novo despite not owning a majority of shares. Companies controlled by “responsible serious families or small groups of shareholders that care about the long run are very successful,” Du Plessis says.
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Relatively low executive pay is another weakness, adds the South African-born boardroom veteran. “The reality is that across the pond, you go to the US, and they are paid multiples of what people are paid here, stratospherically different levels, and they are being very successful. And no one seems to care.”
He says the publication of ratios between CEO pay and the lowest-paid worker is “yet another political tool to try to embarrass companies and the boards and their chief executives.”
Proxy agencies, which have railed against remuneration committees, “are a law unto themselves,” he adds, echoing criticism of the groups from current FTSE chairs.
Accounting Scandals
Du Plessis, 69, inherited an organization accused of failing to prevent multiple corporate scandals, including at the cafe chain Patisserie Valerie and construction giant Carillion. John Kingman, the chair of Legal & General Group Plc, concluded in a 2018 review that the organization was a “ramshackle house” built on “weak foundations.”
Kingman recommended that the FRC was replaced with a new beefed-up body, feared by those it regulates. It was to be called the Audit, Reporting and Governance Authority.
Arga, however, is still awaiting government legislation. “The problem is — it’s not sexy, it’s not going to win votes,” Du Plessis says, adding that the temptation for politicians to wait for a more “convenient time” was short-sighted. “If you’re serious about smarter, proper regulation of the business world, we need the regulation.”
Beer and Wine
Wrestling with the big four auditors should be child’s play for Du Plessis, who stood firm and held out for a sixth improved offer before agreeing to sell SAB Miller in the $106 billion “mega-brew” takeover of 2015.
Du Plessis grew up in Cape Town, studying business and law at Stellenbosch University before qualifying as a chartered accountant. At 27, he joined Rembrandt Group as an assistant to the finance director. In 1988, Rembrandt spun off its international business into Swiss luxury-goods company Richemont, and Du Plessis became its finance chief.
He then became finance director of Rothmans, the tobacco company, which Richemont sold to British American Tobacco Plc in 1999. After being made chair of BAT, he took the same job at Rio Tinto.
It was there that he saw off a bid from Ivan Glasenberg, who promised a “match made in heaven.” Du Plessis said no, but Glasenberg was so confident that he pledged to buy Du Plessis the “best case of red wine money can buy” if the deal wasn’t back on the table within two years. “And I know who won by far,” says Du Plessis, with a chuckle. “If we look at the problems that Glencore subsequently ran into with regulators across the world, I’m going to say to you, I’m not surprised.” He is still waiting for the wine.
Glasenberg declined to comment.
Du Plessis was less successful in rejecting the advances of Carlos Brito, then-CEO of Anheuser-Busch InBev NV. He was in Vancouver, at a Rio Tinto strategy meeting, when Brito, who already had the support of SAB Miller’s two biggest shareholders, called and asked for a meeting. “I knew it was going to be a takeover, and I knew there was nothing that was going to stop this takeover from going through,” says Du Plessis.
Since the deal completed, AB InBev’s shares have almost halved, a fact Du Plessis notes with “some pleasure.” “In many respects, it’s a deal that should never have happened,” he says.
Watered Down
After AB InBev, Du Plessis joined the board of BT Group Plc, but left in 2021 following disagreements with the company’s chief executive, Philip Jansen. Rather than withdrawing to his goats, alpacas and chickens at a smallholding he owns in Buckinghamshire, to the west of London, with his wife Leni, Du Plessis decided to overhaul the FRC, where he is paid £125,000 ($157,000) a year.
Ministers have watered down plans for an overhaul of audit and boardroom rules in the UK, dropping a proposal to require directors to sign-off on companies’ internal controls — a “mistake,” rues Du Plessis. The proposals were to echo the Sarbanes-Oxley Act in the US. Instead, a provision will be added to the corporate governance code. But this applies only to Britain’s largest listed companies, and boards can opt not to comply, provided they explain their reasons.
Du Plessis is unimpressed. “If as a society we are serious about addressing these sorts of scandals, we’ve got to find a way of holding to account those who have primary responsibility for accounts rather than focusing all our attention on the auditors,” he says. The FRC has handed out £182 million in fines to auditors since 2010, which Du Plessis says is part of a “more assertive” approach.
Everest
Reform of the UK’s big four auditors — EY, Deloitte, KPMG and PwC — has centered around the operational separation between auditing and advisory work. EY had sought to go one step further, with a full breakup. The idea – codenamed “Project Everest” — was ultimately abandoned, at a cost of hundreds of millions of dollars. Du Plessis says he’s never advocated for a structural split of any of the audit firms in the way EY was proposing. Instead, the big four have agreed an operational split between the two camps in the UK, which he says has been “very effective.”
While Du Plessis says the FRC today is a more “respected” organization than the one described in Kingman’s report, it is still without a chief executive officer, after Jon Thompson left earlier this year to lead the High Speed 2 rail project. If there’s one thing Du Plessis has learned, however, it is how long it can take to get the UK government’s stamp of approval. Three months after Thompson’s departure, “we are almost at the point where we can commence the search.” Just don’t expect it to be quick.
(Corrects to show that Kingman is still chair of Legal & General in 11th paragraph)