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Shareholders rocked by water chief’s past

northern rock bank

Heavy criticism has been levelled at utility company Northumbrian Water for
failing to disclose in its annual report that the company chairman had stepped
down from his role at collapsed bank Northern Rock where he was chairman of the
audit and risk committees.

The protest from shareholder consultancy PIRC could result in difficult
questions for Sir Derek Wanless at the water company’s AGM today and emerges as
clear concern that a director may have been tainted by involvement with Northern
Rock.

Sir Derek’s role at Northern Rock was criticised in a House of Commons report
in January which said: ‘The non-executive members of the board and, in
particular, the chairman of the Board, the chairman of the risk committee and
the senior non-executive director, failed in the case of Northern Rock to ensure
that it remained liquid as well as solvent, to provide against the risks that it
was taking and to act as an effective restraining force on the strategy of the
executive members.’

PIRC governance analyst David Sneyd said the disclosure should have been made
in the annual report in the interest of transparency to enable shareholders to
make their own judgements.

‘His [Sir Derek’s] role wasn’t insignificant. I understand the company’s
policy of not running biographies of non-executive members, but in this case an
exception should have been made. Although he is not up for re-election, the
shareholders should have been made aware of the situation,’ said Sneyd.

He added that shareholders could raise the issue at the AGM.

‘This is about boards being open and honest about the experience of
individuals who are at the top of running the company and it is therefore of
prime concern to shareholders,’ said Sneyd.

Stawart Hazon, group financial controller of Northumbrian Water said: ‘We
disclose the biographies of previous executive positions, but we don’t disclose
previous non-executive positions as this would otherwise become lengthy. I don’t
believe the board will be reviewing this position.’

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