Supercode is in danger

The Stock Exchange was advised this week that its attempts to enforce a combined code on corporate governance were in danger of being undermined, writes Phillip Inman.

The English ICA urged the Exchange to force directors to give comprehensive statements in annual reports and accounts stating how they have complied with the code. If directors are are allowed to avoid giving details in their explanation of why they have not followed the code, enforcement will be difficult.

Sir Brian Jenkins, chairman of the institute’s corporate governance group, said: ‘There is a danger the new statement will lead to “boilerplate” disclosure. Directors must focus on explaining concisely how they ensured the right board is in place and effectively functioning.’

The institute called for the code to define what an independent non-executive director should provide and the importance of splitting the roles of chairman and chief executive.

The Exchange is combining the Cadbury, Greenbury and Hampel corporate governance reports. Consultation on how the document will sit alongside the Exchange’s Yellow Book of listings rules closed last week.

The Exchange will not police the code but it will expect each company to give an account of how well it has adhered to it.

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