| FTSE boards undergo significant change in response to Combined Code |
|
|
| 10/06/2004 | |
|
British companies are moving quickly to secure compliance with the new Combined Code on corporate governance, which replaces the previous code in effect since 1998. Although companies are not required to report compliance with the new code until next Fall, FTSE 350 boards are already changing extensively and more swiftly than expected. Latest research by Deloitte, the professional services firm, found that more than 80% of boards have changed their composition during the last year in order to address independence issues. Half (49%) have adjusted the executive element of the board and three quarters (73%) the non-executive element. This has resulted in more executives leaving the board than being appointed and more non-executive directors being appointed than leaving. It also seems that companies have a different understanding of the independence of non-executive directors than the one found in the Combined Code. Indeed, although 77% of companies consider all of their non-executive directors to be independent, only 55% believe that they meet the definition of independence in the Combined Code. The research, based on the responses of 75 FTSE 350 companies, found that 56% of boards already comply with the Combined Code requirements that half the board should be made up of independent directors. "Despite some criticism when the Combined Code was first released, the rate at which policy is changing suggests that companies do, in fact, support the principles encapsulated in the Code and are really beginning to engage with the spirit of the Higgs recommendations," says Rupert McNeil, executive remuneration partner at Deloitte. "Companies appear to recognise that these processes will improve board effectiveness and support better performance." Changes The biggest changes in board management over the last twelve months have been in the area of training, development and performance evaluation and the role of the nomination committee. 59% of companies now have a formal process in place for the nomination committee to evaluate the balance of skills, knowledge and experience of the board, using this to identify gaps and to look at board succession. "This process will identify any areas where more training would be beneficial," says Rupert McNeil. "The majority of companies now have a formal induction programme for new appointments -- 72% of companies compared to 46% last year -- but interestingly the number of companies providing an on-going development programme for directors has also increased from 33% in 2003 to 68% currently." FTSE 350 companies are also introducing formal performance evaluation processes for the board and the directors. The number of companies that evaluate the performance of non-executive directors has increased in the past year from 11% in 2003 to 63% in 2004. Over half (59%) of companies have a formal board evaluation process in place and a further 35% plan to implement such a process in the future. J.L. |
|
Articles of the same Topic : Corporate governance
|
|
© Copyright 2008 bfinance. This document is for your personal non-commercial use. Any further copying, reproduction, distribution is strictly prohibited. To obtain permission please contact This e-mail address is being protected from spam bots, you need JavaScript enabled to view it