LAPFF began its submission to the consultation by calling for the FRC to be disbanded. The body claimed that answers to Parliamentary questions had shown that the FRC has been designated a public body since 2004, ‘but has avoided the obligations that stem from that status.’

It went on to claim: ‘More detailed information released by the Office of National Statistics (ONS) has revealed the FRC stating itself to be a collaboration between the Confederation of British Industry (CBI) and the CCAB (the Accounting Institutes’ umbrella body) with seats on the FRC board to those parties as the result for funding it.

‘LAPFF cannot think of clearer evidence of regulatory capture. LAPFF considers that the positions of the FRC chair and the chief executive are untenable and considers that the FRC should be put into special measures, to be run by commissioners until a new body is set up under primary legislation’.

In its public rebuttal, the FRC stated: ‘It is correct that the FRC has been classified as a public body since 2004 but it is incorrect to say that the FRC “has avoided the obligations that stem from this status”.

‘From 2004 the FRC has worked with the DTI and its successor bodies to establish whether the classification recommended by the ONS (and later confirmed by the ONS) was correct. During that period the FRC has been part of the whole of government accounts and has provided detailed financial information to and maintained a close working relationship with its sponsoring department, has participated in various government initiatives and has reported to the Secretary of State and Parliament each year on its activities.’

On the question of the FRC’s alleged collaboration with the CBI and CCAB, the regulator described this as an incorrect statement which ‘illustrates the dangers of drawing arguments from historic documents’.

‘It is correct to say that when the FRC was established in 1990, the CCAB and CBI presidents held representative positions on the board and the council but it is incorrect that this was in return for funding.

‘Moreover, the FRC’s governance was changed in 2007 to bring an end to any representative seats on the board and to abolish the council,’ the regulator stated.

The chair and deputy chair of the board are appointed by the secretary of state and other board appointments are now undertaken following an open selection process and the nomination of an independent assessor, the FRC said.

The regulator also dismissed LAPFF’s claims that only two current board members could be considered independent by pointing out European legislation dictates that no member of a regulatory Board should have practiced as an accountant within the three years prior to his or her appointment, and all relevant FRC board members ceased to be practising accountants within a regulated accountancy firm at least seven years ago.

The FRC refuted further claims that there was a ‘board within a board’, or that the board model ‘resembled a club’, saying there was no evidence for LAPFF’s assertions which bear ‘no connection to the reality of our governance processes’. Similarly, it denied allegations of ‘internal cultural problems’.

The FRC took issue with LAPFF’s characterisation of its approach to handling long term incentive plans and other executive remuneration issues, where the forum claimed it had been too reticent.

Finally, the regulator challenged LAPFF’s claims that accounting practice ‘has clearly taken the wrong direction’, under the auspices of the FRC, and has come adrift from company law.

The FRC stated: ‘Your assertion that accounting practice has taken the wrong direction in this context is an opinion, and one that is not shared by the majority of stakeholders who participate in the public consultations that precede the incorporation of new or amended IFRS into EU and, by regulation, UK law.’

LAPFF’s response to the FRC corporate governance code consultation is here.

FRC’s reply is here.

Report by Pat Sweet