Leaked proposals from the Hampel committee to give the Stock Exchange control of a corporate governance supercode faced severe criticism this week, after shareholder groups said the scheme was flawed.
The Exchange plans to administer a system that will force listed companies to state if they have complied with recommendations set out in the Cadbury, Greenbury and the soon to be published Hampel corporate governance reports.
The reports will be compiled in a supercode that will be attached to the Exchange’s own rules – known as the Yellow Book – but will not be enforced as part of the rules. Directors will be expected to make a simple statement setting out if they have followed the recommendations.
The move has been widely seen as an attempt to head off legislation by the government, which is keen to introduce stricter corporate governance rules.
Shareholder groups said that more consultation was needed before the scheme went ahead. ‘There are several problems with the current proposals,’ said Alan MacDougal, joint MD of shareholder pressure group PIRC.
‘The Exchange does not have a strong track record of regulating its own members – who pay its fees – so we are sceptical that it will be policed properly,’ he added.
Tom Benyon, chairman of the Guild of Shareholders, said that the scheme would fail unless it was enforced. ‘Unless it has teeth it will be ignored by lots of companies, particularly those in the small company sector,’ he said.
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