Firms warned levels of disclosure must improve
Confidence in business culture has been undermined, says report author
Professor Niamh Brennan said yesterday that recent corporate governance issues in both listed and state-owned companies "have undermined confidence in corporate culture in Ireland".
A special review chaired by her on corporate governance among public companies found a "high level" of compliance with a key stock-market code.
But the authors warned companies that they need to improve their levels of disclosure in annual reports in plain language, rather than relying on 'boiler-plate' statements.
Irish Association of Investment Managers (IAIM) chief executive Frank O'Dwyer, who also sat on the review panel, said he had a particular gripe with company reports not giving enough information on the biographies of directors.
"Reports may tell you that a person is sitting on an audit committee -- but they don't say why," he said.
Margaret Cullen, a corporate governance expert with the UCD Michael Smurfit Business School, said reports did not give enough information "on what skill-sets non-executive directors bring to the board".
She said groups should give good reasons for non-executives remaining in a role for a second three-year term -- or, at a push, to the outer limit of nine years allowed by the so-called combined code on governance.
The report recommends that boards use their annual reports "as a vehicle for demonstrating to investors that governance culture, processes and procedures within their companies are robust and deliver to the spirit, as well as the letter, of the code".
Other recommendations include:
- A justification for the current board size and structure, particularly where the board is non-compliant.
- Recommendations from chairmen regarding new appointments should set out the skills that the proposed director would bring.
- Where there are particular challenges facing a company attracting, retaining and motivating key personnel, the specific facts leading these challenges should be described.
- In cases where it is deemed that non-compliance with a particular provision is in the best interest of the company, a robust justification for this opinion should be provided.
Mike Duignan, head of market supervision with the Irish Stock Exchange, said it would open the recommendations out to consultation with market participants. He said this would feed into planned amendments of the actual code, being proposed by the Financial Reporting Council in the UK.
The IAIM is pushing for publicly-quoted companies to give shareholders a 'say on pay' at annual shareholder meetings. "We're not looking for these votes to be binding. But even if only 20pc of your shareholders go against your remuneration report, you've got a problem," said Mr O'Dwyer.
Ms Brennan declined to comment on a corporate governance report she has handed into Environment Minister John Gormley on the Dublin Docklands Development Authority (DDDA), where she was parachuted in as chairman 12 months ago.