Sally Wheeler makes a prediction. ‘The next problem will be mass actions over the mis-selling of financial products. People are realising how little their retirement pot has assembled since they went into a private pension scheme. Lloyds have already been fined a vast amount for selling care packages which turned out to be inappropriate. There’ll be more of this.’
It is the kind of issue which Professor Wheeler watches keenly. She has spent her whole career working in the area of commercial law and has been at Queen’s since 2004 as Chair of Law, Business and Society.
She says, ‘A lot of people think commercial law is very dry and obscure. But it’s really interesting and often very simple, using simple concepts and simple devices to order the commercial world. I look at why people design the devices they do, whether they work or not. I spend a lot of time talking to lawyers who design them, to bankers and to regulators who are always trying to play catch-up.’
Her most recent area of research, funded by the Economic and Social Research Council, has centred on developments in the United States where there has been an increase in prosecutions being negotiated between corporations and the Department of Justice and the Securities and Exchange Commission.
‘An example would be a company that hasn’t declared its correct balance sheet on its accounts because if it did its stock market price would be affected. The American regulator is saying – that’s very naughty. We’re going to put an independent monitor into your firm to watch what you do. They’re going to tell you to comply with certain regulations for a certain period of time and if you do, then this will be written off.
‘We wanted to look at how consistent the arrangements were, whether corporations would sign up to this or would they say – sue us. We were also interested in the transfer of personnel – whether firms were keen to take on people who had worked in a regulator’s office and so would know how"I talk to lawyers, bankers and regulators who are always trying to play catch-up." these arrangements worked and how to avoid them. We found a lot of gamekeepers turned poacher.’
There has been no sign of similar developments in the UK. ‘We wondered if this idea would take off here and it hasn’t. I suspect that the corporate culture accounts for a lot of that. We found that the American firms didn’t seem to mind having these corporate monitors dropped on them and they saw that as more viable than the alternative. Here, enforcement is lower. Far fewer firms are ever sued in the UK or pursued by the regulator. Consequently there isn’t the same incentive to sign up for those sorts of arrangements and UK firms are not used to that degree of interference.’
The research followed a previous project looking at new US legislation to deal with corporate collapse like Enron. Could such an event happen again?
‘These things never go away. Look at the cycle. In the early 90s in the UK you had Polly Peck and Robert Maxwell and they resulted in a raft of new legislation. By the time you get to 2000 you see a lot more with the bursting of the Dot Com bubble and now we have various Treasury reports into things like Northern Rock and the running of RBS.
‘These business models were never financially sound. Whose fault is that? Who was supposed to monitor them? How do we stop it happening again? So we close a few more gates. But my guess is that in ten years time exactly the same thing will happen.
‘People like me have been saying for years that it would all end in tears but when it does, do you feel pleased? You don’t get a platform for saying things will go wrong, not when a government and people themselves are in full swing, but it doesn’t mean you can’t help shape the alternatives.’
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