CHAIRMEN FACING ANNUAL ELECTION
COMPANY chairmen could face annual re-election under wide-ranging new proposals on corporate governance published today.
The consultation by the Financial Reporting Council (FRC), chaired by Sir Christopher Hogg, also suggested external assessments of boards’ performance every three years.
The guidelines are the latest attempt to reform the Combined Code and overhaul boardroom accountability in the wake of the financial crisis. Some measures from FRC chief executive Stephen Haddrill and his team echo proposals put forward by Sir David Walker in his review of the banking sector last week.
Last night industry leaders raised concerns over the prospect of annual votes on chairmen or other board members, warning they could detract from the need to develop long-term relationships with shareholders.
Matthew Fell, director of company affairs at the CBI, said: “The goal is to deliver more accountability to shareholders, but the more important emphasis is to make sure investors are engaged in dialogue and strategy.”
Fell said annual re-election was “a fairly blunt tool to achieve that aim”, adding: “If you are resorting to a vote, that’s an indication the dialogue isn’t working.”
Angela Knight, chief executive of the British Bankers’ Association, said: “The last thing you want is for boards to feel they are constantly facing elections. However, the boards I know are focused on the stability of their companies, and putting themselves up for election is entirely part of that process.”
There was broad support for the idea of external assessments at least once every three years. Sir Victor Blank, ex-chairman of Lloyds Banking Group, said: “Board evaluation reviews are a good thing. Shareholders need to take an informed view of the moves the board is taking.”
Other key points from the review include:
•New guidelines on the leadership expectations of chairmen and the skills and independence of non-executive directors;
• Tighter rules on risk management;
• Emphasis on performance-related pay being aligned to the long-term interests of the company.