Corporate Europe Observatory

Exposing the power of corporate lobbying in the EU

RevolvingDoorWatch

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Sharon Bowles

Former employer: 
European Parliament
Former function: 
Member of European Parliament (for 9 years)
New function: 
Non-executive director
New employer: 
London Stock Exchange Group plc + Prime Collateralised Securities initiative (PCS)
Nationality: 
UK
Policy area: 
Date of Revolving Door: 
August, 2014
Institutional reaction: 

None. There is no regulation requiring former MEPs to seek authorisation for their subsequent activities.

Other info: 

Sharon Bowles had been an MEP since 2005 until she stepped down at the 2014 EU elections. From 2009, she was chair of the Parliament's economic and monetary affairs committee (ECON) which played a key role in co-drafting EU law and regulations for the financial industry in the wake of the economic and banking crises. As such, it is one of the most influential committees in the European Parliament.

As part of ECON, she wrote reports on a range of matters including on new appointments to the European Central Bank and on Solvency II (regulation for the insurance industry), and as chair of ECON, she will have managed the overall process to finalise the markets in financial instruments directive (MiFID), the alternative investment fund managers directive (AIFM) and the capital requirements directive (CRD), amongst others. All of these dossiers were strongly fought over by the financial industry lobby.

Research by Corporate Europe Observatory showed that during the revision of the European market infrastructure regulation (EMIR) in 2011 (which includes regulation on controversial financial instruments such as derivatives) Bowles “tabled several amendments that were also tabled by other MEPs and which were probably the result of industry lobbying”.

Further research has been conducted by CEO based on the on-line list of meetings collated and published on Bowles' website. This shows that Bowles had 10 meetings with the London Stock Exchange (LSE) in two years (2012-14) including four meetings with its chief executive Xavier Rolet, two of which were over lunch. She also spoke at the LSE's Christmas lunch in December 2012. From mid-2011 to spring 2014, Bowles' staff had eight separate and additional meetings with the LSE, at least three of which were on the topic of MiFID.

Both Bowles and her staff also met with numerous other representatives of the financial industry sector during this period and this led her to be criticised by the World Development Movement, especially when she then refused to meet with local anti-poverty campaigners in her constituency during the negotiations on MiFID which included provisions to regulate food commodity speculation. Bowles was initially opposed to tough regulation of the commodity speculation market, repeatedly stating her support for a (weaker) position management proposal and only later agreed to support a compromise text agreed by the ECON committee which did require some limits on speculation albeit with significant loopholes and exemptions.

In August 2014, just months after stepping down as an MEP, the London Stock Exchange Group plc (LSEG) announced that Bowles would join the board as a non-executive director with immediate effect saying:

“This appointment brings the Group deep experience in UK and European politics, economics and regulation impacting the market infrastructure sector.”

Chris Gibson-Smith, Chairman of LSEG, further commented:

“We warmly welcome Sharon to the Board. Sharon brings extensive knowledge of European political and regulatory trends impacting our business. Her experience and insight will be of great value to the Group, as we operate in an increasingly complex and evolving regulatory environment. I look forward to working with her.”

According to its website, LSEG

“sits at the heart of the world’s financial community. The Group operates a broad range of international equity, bond and derivatives markets, including London Stock Exchange; Borsa Italiana; MTS, Europe's leading fixed income market; and Turquoise, offering UK and Russian derivatives trading, pan-European and US lit and dark equity trading”.

Bowles' move has generated strong criticism from recent MEP colleagues. Sven Giegold MEP, another member of the ECON committee, has called Bowles' move “scandalous” via a strongly-worded statement. He said:

“ECON is at the heart of the parliamentary work on all European legislation to regulate financial markets after the crisis. Sharon Bowles has personally chaired almost all crucial negotiations between European Parliament, member states and the European Commission... She knows all people and is adept to all tricks of the game. Her swapping of sides is scandalous. It is bitter to see how she is selling her good reputation to the London Stock Exchange.”

In a recent article on the Spiegel website, Bowles' ECON colleague Werner Langen MEP is quoted as saying that Bowles, whilst chair of ECON, always had “documents from the City of London for every topic we discussed” during legislative negotiations and “she has always insisted that the position of the City of London does not perish”.

Giegold told Spiegel that

“Sharon Bowles was always a conspicuous market liberal when it came to the regulation of trading and stock market trading. Now she could thwart the implementation of hard-won EU rules against food speculation for the London Stock Exchange.”

Bowles has defended her new role and told CEO that as a non-executive director (NED), her role is to "constructively challenge and help develop proposals on strategy". She went on to say that her

“extensive regulatory knowledge will allow me to provide counsel and challenge the Executive management on how they are adapting their business to an evolving regulatory landscape”.

She has rejected any accusation that her move represents a potential conflict of interest saying:

“It is only through the ability of business to recruit NEDs with a full and diverse set of experiences and skills that we are able to bring greater growth and financial stability to Europe. I understand that to be the thrust of corporate governance legislation and financial supervisors engagement with NEDs”.

Sharon Bowles' full comments to CEO in advance of publishing this article can be read here.

Bowles did admit in an article in the Financial News that “ideally, I would not have joined the LSE as quickly as I did”. The Financial News says that the appointment was accelerated so she could join ahead of the exchange's landmark US$2.7 billion to acquire US index provider Russell Investments.

The FT Alphaville blog says that Bowles has recommended reading a Group of 30 report looking for a new paradigm for interaction between supervisors and boards of major financial institutions across the globe. Yet the working group that produced this report was packed to the gills with representatives from the major global banks so it is perhaps not surprising that it is now being used to justify Bowles' revolving doors move to the finance industry.

LSEG is not listed in the EU's transparency register despite it clearly being an active lobbyist on financial regulation matters. [Update: LSEG joined the lobby register on 28 November 2014.]

Bowles is not the only former ECON MEP to go through the revolving door recently. Corien Wortmann-Kool has recently joined the board of AEGON while Arlene McCarthy has now joined lobbyists Sovereign Strategy.

Sharon Bowles is no stranger to controversy. Whilst an MEP, she also declared a small additional monthly income from her ongoing partnership at patent law firm Bowles Horton which she had previously set up with her husband. In CEO's view, this was problematic because for seven years, Bowles was also a substitute member of the European parliament's legal affairs committee.

The rules in the European Parliament

The current revolving door rules for MEPs are so weak as to be virtually non-existent.

The code of conduct for MEPs (approved in 2011) states that

“Former Members of the European Parliament who engage in professional lobbying or representational activities directly linked to the European Union decision-making process may not, throughout the period in which they engage in those activities, benefit from the facilities granted to former Members under the rules laid down by the Bureau to that effect”.

However, there is no process to monitor or enforce this part of the code and ensure that former MEPs do not use their lifelong access pass for lobbying purposes.

When MEPs leave the European parliament they are entitled to a transitional allowance equivalent to one month's salary for every year they have been an MEP, with a minimum pay-out of six months' salary and a maximum of 24 months.

Bowles has told CEO that she will accept her transitional allowance of nine or ten months' salary saying: “I regard this as part of my contract when I was elected as I gave up a much higher earning profession”. Gielgold estimates that in the case of Bowles, her transitional allowance would amount to approximately €60,000.

Update 17 May 2016: Bowles has now joined the board of the Prime Collateralised Securities initiative (PCS), which calls itself "an independent, not-for-profit initiative set up to re-inforce the asset-backed securities market in Europe as a key to generating robust and sustainable economic growth for the region." It seems to be a lobby outfit for the finance industry and its "indirect" members include big names such as Bank of America Merril Lynch, Barclays, Deutsche Bank, HSBC, Santander and many others. It spent €200,000 - €299,999 on lobbying the EU institutions during 2015, with a focus on the Capital Markets Union, securitisation and SME financing. PCS also runs a certification scheme for securities which "meet our strict quality criteria".

Ian Bell is PCS' key EU lobbyist. According to a Financial Times article,

"When Ian Bell visited the European Commission in the dark days after the global financial crisis to lobby for “high-quality” asset-backed securities, the veteran financial analyst was given short shrift. The packages of loans that were sliced and diced and sold off to investors had become one of the symbols of the type of financial engineering that brought on the worst economic crisis since the Great Depression."

However, the article reports,

"By late 2013, however, the policy makers were inviting him back to Brussels. “When I arrived they were sitting in a room with pads and pens saying, ‘high-quality securitisation – how can we make it work?’"

Het Financiële Dagblad reported in April 2016 that Bell is actively lobbying on the current  EU proposal for securitisations which the Commission is now discussing with the Parliament, but that it is "incredibly frustrating" and that while "five years ago this was unthinkable proposal ... it is true that it is much slower than hoped."

According to her entry in the House of Lords declaration of interests, Bowles remains a non-executive Director, London Stock Exchange Group plc and a non-executive Director, London Stock Exchange plc. Bowles is also a member of the Systemic Risk Council which calls itself "a private sector, non-partisan body of former government officials and financial and legal experts committed to addressing regulatory and structural issues relating to global systemic risk, with a particular focus on the United States and Europe."

Comment from CEO: 

“It is shocking that the former chair of the European Parliament's influential Economic Affairs committee has joined the London Stock Exchange Group so promptly after leaving office. LSEG clearly has a strong interest in the insights, contacts and insider know-how of Sharon Bowles and she is hugely familiar with the detail of the regulation affecting LSEG. As the third ex-ECON MEP to join the private sector in recent months, it is high-time that Martin Schulz, as president of the European parliament, introduces some tough new rules to prevent the risk of conflicts of interest and abuse of power occurring via the revolving door.”

 
 

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