British directors likely to face annual elections
Directors in the United Kingdom could be forced to seek re-election by shareholders every year, under measures that will be announced this week in an attempt to make the boardroom more accountable.business Updated: May 24, 2010 23:31 IST
Directors in the United Kingdom could be forced to seek re-election by shareholders every year, under measures that will be announced this week in an attempt to make the boardroom more accountable.
The boardroom code, which will be published on Friday, is being billed as the most comprehensive overhaul of the way companies are managed since the banking crisis put corporate governance under scrutiny. Much of the finger pointing amid the financial turmoil of the past couple of years has been toward non-executive directors for failing to rein in their executive teams.
The code will also press company chairmen to think about improving the representation of women in the boardroom, although it will stop short of setting a quota. Only 10 per cent of directors in Britain’s top 100 companies are women, and 25 of the top firms have no women board members at all.
The Financial Reporting Council, an independent body that regulates companies’ corporate governance, will meet on Tuesday to rubberstamp these ideas. Currently, directors face re-election once every three years, on a staggered basis, although a growing number of firms are moving voluntarily to annual votes. The proposal is backed by investors, but could still be watered down following a backlash from business. Opponents have included British Airways, Tesco and Sainsbury.
In his submission, Sir Christopher Gent, the chairman of drugs group GlaxoSmithKline, warned the proposals might cause “an inappropriate focus on the short term”. The code could bring in a number of other changes including external reviews of a board’s performance. The FRC declined to comment.