Spencer Stuart Governance Lexicon 2007
Hot topics in corporate governance — United Kingdom
Director liability
The protracted legal proceedings involving directors of Equitable Life were finally settled, yet director liability remains an area of much discussion in the UK. The Companies Bill, completing its passage through Parliament at the end of 2006, has caused considerable debate. The Bill states that directors have a duty “to promote the success of the company for the benefit of its members as a whole” and to take into account the interests of employees, the community and the environment in decision-making. While there is some support for the codification of directors’ responsibilities, there are concerns that directors will be so focused on avoiding exposure to legitimate or opportunistic claims from diverse shareholder groups that boards will become more cautious and risk averse. There may also be implications for director recruitment.
Former CEOs moving up to become chairman
There have been more examples than usual of chief executives being promoted to chairman. The Combined Code views this as an exceptional occurrence, not least because it goes against the recommendation that a chairman be deemed independent on appointment. It also highlights the need for a strong senior independent director or deputy chairman. Some institutional shareholders are concerned at the trend towards the CEO becoming
chairman, particularly if the “explanation” is either non-existent or cursory, and in one instance such a proposal was blocked.
Remuneration
Discussion of the appropriate remuneration for both executive and non-executive directors continues, albeit somewhat less prominently. Remuneration committee chairmen have a higher profile than hitherto, and company chairmen are now permitted to sit on the remuneration committee. Companies continue to evaluate the scale and structure of non-executive remuneration in the light of increased time commitment, especially on committee work, and perceived exposure. More companies are paying a premium for committee work, particularly committee chairmanship.
To learn more about the Spencer Stuart Governance Lexicon contact Alastair Rolfe in London