31 Jul 2008
Heavy criticism has been levelled at utility company Northumbrian Water for failing to disclose in its annual report that the company chairman had stepped down from his role at collapsed bank Northern Rock where he was chairman of the audit and risk committees.
The protest from shareholder consultancy PIRC could result in difficult questions for Sir Derek Wanless at the water company’s AGM today and emerges as clear concern that a director may have been tainted by involvement with Northern Rock.
Sir Derek’s role at Northern Rock was criticised in a House of Commons report in January which said: ‘The non-executive members of the board and, in particular, the chairman of the Board, the chairman of the risk committee and the senior non-executive director, failed in the case of Northern Rock to ensure that it remained liquid as well as solvent, to provide against the risks that it was taking and to act as an effective restraining force on the strategy of the executive members.’
PIRC governance analyst David Sneyd said the disclosure should have been made in the annual report in the interest of transparency to enable shareholders to make their own judgements.
‘His [Sir Derek’s] role wasn’t insignificant. I understand the company’s policy of not running biographies of non-executive members, but in this case an exception should have been made. Although he is not up for re-election, the shareholders should have been made aware of the situation,’ said Sneyd.
He added that shareholders could raise the issue at the AGM.
‘This is about boards being open and honest about the experience of individuals who are at the top of running the company and it is therefore of prime concern to shareholders,’ said Sneyd.
Stawart Hazon, group financial controller of Northumbrian Water said: ‘We disclose the biographies of previous executive positions, but we don’t disclose previous non-executive positions as this would otherwise become lengthy. I don’t believe the board will be reviewing this position.’
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