Regulatory Enforcement and Sanctions Bill [HL]

moved Amendment No. 2: 2: Schedule 1, page 34, line 32, at beginning insert ““half”” The noble Lord said: We are in the same territory as the noble Baroness, but I shall explore a little further the structure of the board and the way in which it is proposed that it will be built up. I was delighted to hear the Minister’s assurance in response to the noble Baroness’s amendment that all the current appointments have been made with due process—not that I doubted that, but it is good to have it on the record. I look forward to the future and to what might happen in other times and other circumstances. As I understand it, we have two classes of members. There are the ordinary members, who are appointed by the Secretary of State—although I note in paragraph 3(4) that the chairman must be consulted before those members, who include the chairman, are appointed—and the ex officio members, who include the chief executive and who are to be appointed by the chair after consulting the chief executive. I found the wording, particularly in line 27, quite strange. It certainly does not meet general corporate governance principles. When you serve on the board of a company, you have some say in who will join that board. The chairman does not appear one morning, saying, ““Here is your new member””. He may lead the process, set the executive search people going and arrange the interviews. He may do all that—undoubtedly he and the chief executive will have considerable influence on how the shortlist is drawn up—but the members of the board will have some say. What is set out in the paragraph is an unfortunate way to proceed, because it gives the chair huge power in the board. Although one cannot foresee what will happen, one is always concerned where there are no proper checks and balances. This is not just a theoretical question, because if the Bill is enforced in its current form and we have, say, four ordinary and four ex officio members—half and half, as laid down—on a board of eight, we would have three ordinary members and the chairman and three ex officio members and the chief executive. It is perfectly clear at that point that the chairman, the chief executive and the ex officio members will all be in the same loop. That is because the chief executive and chairman work closely together—if they do not, we are in some difficulty—and because the three ex officio members are appointed through the chairman’s say-so. Either we should limit the number of ex officio members and so limit the chairman’s power, as my amendment would do by saying that their number should not exceed half the number of ordinary members—I accept that the noble Baroness, Lady Hamwee, will say that half is 50 per cent, so it is just the same as saying four out of the eight—or we should find some other way in which the number will not be equal, thereby reducing the chairman’s power. Alternatively, we need to find a way—this is not in my amendment—to improve the appointment process for ex officio members so that, beyond peradventure, how these people are to arrive on the board is written into the Bill. The paragraph is not up to modern corporate governance practice and the Local Better Regulation Office should adhere to the best practice around in British commerce, industry and public life. I beg to move.