A company combining the posts of chairman and chief executive which is seeking a listing, should provide a 'comfort letter' explaining why two top jobs have been given to one person, according to a the report into Mirror Group Newspapers.
The letter would have to explain why combining the two top posts would not be ‘detrimental’ and would have to be provided to the listing authority.
Robert Maxwell was chairman and chief executive of MGN and following his death in 1991, and the pension fund scandal that surrounded his running of the company, a new code of conduct introduced by the Stock Exchange recommended no one person should hold the two most senior posts in a listed company unless it could be justified.
DTI inspectors have now conluded Maxwell should not have been permitted to hold the two jobs at MGN and cast real doubts on whether the 1998 code could have stopped him from doing so.
Because of that, the inspectors have recommended the comfort letter as a way of providing more assurance for shareholders.
They say more legisaltion is necessary but say they are not confident shareholders are aware of the dangers of combining chiarman with chief executive.
‘The view has been expressed to us that advisers and shareholders are fully aware of the risks of combining the posts of chairman and chief executive; as a result of our investigation we are not as sanguine and consider a comfort letter from the sponsor is necessary,’ says the report.
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