BusinessCorporate FinancePoor governance could lead to takeovers

Poor governance could lead to takeovers

Corporate governance shortcomings could leave companies vulnerable to a takeover bid, according to research from KPMG.

In its latest survey of corporate governance in Europe, KPMG said companies seeking to attract funds from global markets would have to demonstrate the highest standards of governance or risk the treat of a takeover.

The study claimed institutional investors were already changing the rules of corporate governance across Europe, leading to a convergence of standards.

Commenting on the survey, KPMG director of corporate governance Timothy Copnell said: ‘Companies that do not demonstrate the highest levels of governance will ultimately lose shareholder value and attract the attention of those who see reforming governance as a means of increasing value.’

According to the survey, a number of common governance standards are likely to emerge over the next decade, including a division of power at the head of companies with strong independent non-executives, more comprehensive definitions of terms such as ‘independence’, and separate audit, remuneration and nomination committees.

The survey also forecast more meaningful disclosure of issues that affect the well-being of a company such as information on social, environmental and other non-financial measures.

Copnell added: ‘There is no doubt that the capital markets will not only drive companies towards common standards of good governance, but will demand that companies demonstrate how they have achieved such standards.’

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