Big business fails governance test

Pension Investment Research Consultants, a corporate governance monitoring group, found the worst levels of compliance related to contract lengths for executives and the independence of board remuneration committees.

However the group said there had been significant improvements since the new code of corporate governance was introduced three years ago.

According to the survey, nearly four out of five directors now held a contract no longer than a year.

But PIRC found that only two thirds of companies had a formal policy restricting such contracts to a year.

Many companies also failed on board structure, with a third of those surveyed not ensuring a majority of non-executive directors were independent.

PIRC also criticised the level of auditor independence – the survey found that while average audit fees had risen by 25% to £2.7m in 2001, this had been outstripped by a 35% increase in non-audit fees, averaging £7.6m.

‘Auditor independence is a fundamental tenet of good corporate governance ? these levels of non-audit work must throw doubt on where an auditor?s commercial interests lie,’ it said.


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