New measures to stop directors from benefiting if businesses collapse were due to be unveiled by the government today.
Prompted by the failures of Carillion, Patisserie Valerie and BHS, the White Paper also proposes a new regulator to oversee the Big Four accounting firms, KPMG, Deloitte, PwC and EY.
All listed companies will be mandated to claw back bonuses and share awards from executive directors if are found to have failed to protect the interests of all stakeholders in a business including staff and customers.
Dividends will also be subject to new scrutiny especially whether companies under financial stress can afford to pay them.
A new levy on firms will be used to pay for the new financial regulator, to known as the Audit, Reporting and Governance Authority (ARGA), with non-listed large companies also to be included as public interest entities.
Future audits are also likely to involve two firms, with a smaller group working alongside one of the big four to work on specific parts of the accounts.
As well as helping to improve the quality of audits, the government hopes this will break the grip of the Big Four on large company audits.
Almost a third of audits of FTSE 350 members were sub-standard, a review last year by the government reported.
Business Secretary Kwasi Kwarteng said: “Restoring business confidence, but also people’s confidence in business, is crucial to repairing our economy and building back better from the pandemic.
“When big companies go bust, the effects are felt far and wide with job losses and the British taxpayer picking up the tab.
“It’s clear from large-scale collapses like Thomas Cook, Carillion and BHS that Britain’s audit regime needs to be modernised with a package of sensible, proportionate reforms.”
The White Paper goes out to consultation until July.