In some other areas, we have found that practices of institutions have fallen substantially short of our expectations as enumerated in existing corporate governance principles that institutions must observe. An example relates to the effectiveness of nomination committees and attention to remuneration practices. In such areas, we find merit in providing more specific guidance to institutions in order to achieve greater progress towards the desired state. I alluded earlier to the particular importance of effective governance as we move towards the adoption of more principle-based regulations for the insurance industry. A common misperception that we find in the industry has been the notion that principles-based  2  BIS central bankers’ speeches  regulation equals deregulation or less regulation. It is in fact neither. The move is mainly motivated by two key considerations: first, a recognition that in an environment of fast-paced innovations, attempts to regulate prudent behaviour through detailed and prescriptive rules is just not sustainable as they risk becoming outdated almost as soon as they are written. Second, common rules often do not adequately capture the risks of larger and more complex institutions, or when they do, they are disproportionately onerous for smaller institutions and this can choke off innovation. The adoption of more principles-based regulation is therefore about re-regulating the industry in a manner that better reflects the risks which an insurer faces. There is a third consideration. With greater focus on principles of sound practice, it is left to insurers to design appropriate internal rules that will govern their activities.

Although these data are far from perfect they suggest that, while within-firm pay differentials have accounted for some of the increased dispersion in pay across households, across-firm variations have made a larger contribution. Tackling the Productivity Puzzle  There has been no shortage of public policy ideas over recent years for boosting productivity growth. Reports by the IMF and OECD have suggested measures ranging from increased infrastructure spending to improved education and training programmes. 58  Earlier this year, the UK Government issued a Green  Paper setting out various pillars to support productivity. 59  And, most recently, here at the LSE the Growth  Commission produced their second report on measures to boost UK productivity. 60  In generic terms, these policy measures fall into three categories. First, there are measures which support all companies, irrespective of sector, region or characteristic. For example, last year’s Autumn Statement provided additional financial support for UK infrastructure spending, while in the Budget a couple of weeks ago the UK government announced plans for increased support for technical skills. Second, there are measures which support technological innovation – the creation and growth of frontier firms. One potentially important micro-economic measure supporting innovation is greater recognition of the importance of companies’ intangible assets, such as intellectual property (IP). These constitute an increasing fraction of companies’ total assets, but are not measured or valued in as consistent and coherent a way as tangible assets such as plants and machinery. This can have real costs for the companies concerned.