Companies are being asked to ignore new governance rules which require the
annual re-election of board members,
Financial Times reports.
Released in June 2010, the code required companies to submit directors to for
reelection each year, a move opposed by corporations and investors who fear the
move would promote short term positions.
Three institutional investors – Railpen and the Universities Superannuation
Scheme – have written to 700 companies encouraging them to ignore the code,
Hermes previously voiced opposition to the code. In a submission in October
it said, “annual elections could…act as a distraction for both directors and
their owners in their mutual task to maximise value over the longer term”.
The code is enforced using the “comply or explain” principle which proved
successful with the previous combined corporate governance code.
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