Moving beyond compliance - Corporate Governance Review 2009

Friday, February 12, 2010 | Posted by: Grant Thornton
Categories: Governance | Tags: FRC, Walker, governance, FTSE 350, Combined Code, non-executive directors, Corporate Governance Review, Grant Thornton

February sees the release of our eighth annual FTSE 250 Corporate Governance Review. This year the review shows that the FTSE 350 are now complying with, on average, 91% of the Code’s provisions. So is it job done?

At the end of 2009, the Walker and Combined Code reviews emphasised the need to move from simple compliance to quality of disclosure. Many companies need to be encouraged to go beyond the minimum disclosure required to comply with the Code or related governance requirements. For example, our survey found:

•  only 16 companies provide detailed disclosures around the performance evaluation of the chairman
•  only 17 companies chose to early adopt the FRC guidance to audit committees providing detailed insight into the decision process for appointing or re-appointing their external auditors
•  30% of the FTSE 100 and 52% of the Mid 250 failed to provide detailed explanations of the actions they have taken to understand and engage with major shareholders
•  59% of companies fail to explain how their disclosed key performance indicators are used to manage their business.

Key areas such as board composition continue to cause issue. In their recent reviews, FRC and Walker Secretariat both proposed a regular external board evaluation - our research shows that only 14% of the FTSE 350 undertook such an evaluation in the current year. We also found that 80 companies did not have the necessary three independent NEDs to comply with the Code.

The FTSE 350 Corporate Governance Review is based on eight years’ of unique data and has been used by both the Walker Secretariat and FRC to support their findings.

If you would like a hard copy please .(JavaScript must be enabled to view this email address)