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Lord Faulkner of Worcester: I am grateful to the noble Lord for giving way. Perhaps I can ask him this. The non-executives on the FSA board published a response to the excellent report of his Joint Committee. Would the view of the Joint Committee have been different, given that he described how finely balanced the debate was on whether or not the two posts should be split, if it had had the benefit of the non-executives' advice during its consideration of this issue?

Lord Burns: My view would not have changed. The response might have been, "They would say that, wouldn't they?" I am not sure that that is necessarily the group of people from whom at this stage one would be wanting to take advice in relation to the organisation in the longer term. I do not want to give the impression that the debate was that finely balanced. We came down clearly on the side that in the longer term this was probably not the right organisation. Moreover, I have some doubts, as the noble Lord, Lord Newby, pointed out, in relation to the specific response we had from the non-executives.

Lord Peston: I did not speak at Second Reading on this matter, not for my usual reason--namely, that there was an important football match to be watched--but simply because I felt that this was a Bill that was substantially correct in all its forms and I did not see the point of wasting 15 minutes of your Lordships' time in saying that. However, I intervene now because we are getting down to the detail.

I too admonish my noble friend Lord Eatwell for suggesting that these amendments are mischief-making. He dealt with the matter admirably by pointing out that the immense benefit of the amendments is to demonstrate without any doubt how right the Bill is as drafted and how wrong the amendments are. It is not mischief-making; it is

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immensely helpful for these amendments to be tabled so that they can be demolished in the excellent way that they have been so far.

My noble friend Lord Borrie called into question certain issues--it sounded more like a demolition of the amendments--but said that the Bill is very clear. A majority of non-executives will meet as a committee. Unless they meet as your Lordships' House meets, they will have a chairman. I should have thought my noble friend would pursue the role that several Members of the Committee said they would like to see.

I am not as enamoured with modern theories of corporate governance as are many other Members of the Committee. Having been the kind of chairman whose main role was to act as psychiatric adviser to the chief executive or to organise dinner parties, I am not persuaded that chairmen have such a marvellous role. I am also a good deal less enamoured, having been one on more than one occasion, of the merits of the non-executives. That thinking is out of fashion these days and people emphasise that what we need in running firms is someone to actually run them.

But as this will be an enormously powerful body--it is right, as my noble friend said, that it should be powerful--we need at the top a powerful executive figure with full responsibility; one who shows leadership and does exactly the job set out in the Bill. The benefit of the amendments is that we are able to elucidate that. The noble Baroness, Lady O'Cathain, raised the matter and for once I am puzzled by what she said. Normally in these areas she says things with which I totally agree. However, she said, "Suppose we appoint the wrong person". That is always a problem. The answer is, first, do not appoint the wrong person; secondly, have a mechanism for getting rid of the wrong person, but do not have two posts solely because one of them might be filled by the wrong person.

Baroness O'Cathain: I thank the noble Lord for giving way. That is not the sole reason for having two posts. He knows that perfectly well. He is just trying to goad me, as is his normal role. Perhaps I can add, as an aside, that I happen to serve in an organisation of which he is chairman, and he does not act as a psychiatrist; he acts as an autocrat. I know that he will take that in the best possible way.

The reality is that one of the roles of a chairman is to appoint the chief executive and to make sure that the chief executive carries out the wishes of the board. The chief executive is, of course, on the board, but it is a useful stopgap for the board to have on it somebody who is appointed by the board for the benefit of all the stakeholders. I take this brief opportunity to say that I am not saying that company boards--corporate governance is the in-thing at the moment--are there solely to look after the interests of shareholders; they have a lot of other "stakeholders", such as the staff, the general public and the good of the country. The noble Lord is trying to simplify what I said and perhaps I used too much shorthand.

Lord Peston: I apologise to the noble Baroness. I should never have provoked her; her intervention has been longer than the whole of my speech.

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I believe that the Bill is right. I remind the Committee also that my noble friend Lord Eatwell emphasised what no other speaker emphasised; that is, that the FSA exists for a reason. That reason involves the serious problems of management of risk and fundamental underlying economic problems. We are not discussing an academic issue of corporate governance; we are discussing a body which must have the power to deal with--we hope that it will not happen--a potentially major, catastrophic, risk-like event hitting our economy.

Finally, I turn to the amendment of the noble Lord, Lord Kingsland--

Lord Phillips of Sudbury: I am grateful to the noble Lord for giving way. I simply wanted to ask: is it not the basic duty of a board to decide how it will deal with those emergencies? Boards decide that every day of every week of every year. Why does the noble Lord feel that if we have a chairman and a director-general, they will be incapable of arriving at a clear line of authority to deal with emergencies?

Lord Peston: I know of no organisation in this country, particularly within the private sector, that will remotely face a potential catastrophe, which we hope will not happen, such as that which the FSA may have to face. We require a single person at the top to show the leadership, the control, and of course to have the organisation organised to cope with such an event. But we are dealing with a specialist issue, which is why I quoted my noble friend.

Perhaps I may now turn to the amendment of the noble Lord, Lord Kingsland, unless he has decided that he does not want it debated with this group.

5 p.m.

Lord Kingsland: Before the noble Lord turns to me, I want to turn to him with respect to the remark that he just made about the FSA facing a "catastrophe". It is very interesting that the one responsibility that does not feature in the objectives of the FSA is that of dealing with systemic risk. So if the authority were faced with the catastrophe that the noble Lord talked about, it would not be entitled to deal with it.

Lord Peston: As I understand it, this is a matter that will emerge during the course of this Committee stage precisely in terms of an amendment. That is why it is there. I know that it is incredibly boring of the one or two of us who are economists to raise economic matters when the rest of the Committee would much rather discuss things like corporate governance and non-executive directors, but the organisation exists for an economic purpose, not for its own sake. That is the point I am trying to make.

Finally, I hope that it is still in order for me to turn to Amendment No. 9A. I shall simply say that I disagree with it. My disagreement starts with the problem that the noble Lord, Lord Kingsland, obviously had. The noble Lord referred to the House of Commons Treasury Select Committee and your

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Lordships' House, but the amendment does not mention the latter. It does not do so for a very good reason; namely, that we do not have a committee--though some of us hope one day we will--that could do the job in the first place.

However, that is not my main objection. I accept the remarks made by many noble Lords--certainly those speaking from the Opposition Front Benches--about the problem of parliamentary accountability. Indeed, I am very concerned about that. But, in my judgment, the amendment is not about parliamentary accountability; it is about how to make a mess of the process of appointment. If we consider, not ad hominem but purely hypothetically, the sort of people about whom we are talking and do so entirely within the context of how we normally make such appointments in our country, the notion that those people of standing who we hope will come forward would not merely be sent for by the Commons Select Committee to be queried and interrogated but would also have their appointments confirmed by such a committee seems to me preposterous in the highest degree.

I am able to think of other possible heads of this body; indeed, it is not a case of only one entering into my mind. The sort of people of the standing I have in mind would, of course, be honoured to come before your Lordships' House, but that is another matter. However, to go before the Commons Select Committee with a view to one's appointment being confirmed--meaning, of course, that it may not be confirmed if members of that committee decided that the person was not good enough--seems to me a completely mistaken idea.

I am not for one moment suggesting that the noble Lord is wrong to raise the question of accountability of this body, as his noble friend did on Second Reading. Indeed, that does intrigue me. However, I do not believe that this proposal would give us accountability; it would just mess up the whole question of how we can get first-class people to work in quasi-judicial bodies. You just do not do it in this way.

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