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25% of FTSE350 chairman fail to champion corporate governance


A quarter of FTSE350 chairman are still failing to give corporate governance sufficient prominence in company annual reports, according to Grant Thornton research.

The firm’s investigation into 242 FTSE350 2011/2012 annual reports found a staggering 25% contained no chairman’s comment on governance despite the reputational damage that can afflict a business when such a key area is overlooked.

It also found that just 5% of chairmen go further in their primary statement and help set the ‘tone from the top’ by discussing their company culture and the values they wish to instil in the business.

While three-quarters (75%) did refer to their board's governance practices in either their primary statement or the governance report, just 44% do so only briefly and less than one in four including any valuable insight into their company's governance practice.

Simon Lowe, partner and chairman of Grant Thornton Corporate Governance Institute, said:

‘The recent high profile scandals have served as a potent reminder of what can go wrong when leaders fail to instil a principled ‘tone from the top throughout the organisation.’

The reputational damage inflicted by such scandals underlines the need for all companies to prioritise good governance. In a crisis, businesses have to rely on the values that have been embedded throughout the business, rather than reaching for the manual. As such articulating the company's values and thereby broadcasting their importance to all stakeholders should be actively encouraged.

He continued:

‘During my many discussions with chairmen and other board members, there has been clear and widespread agreement that the chairman should set the tone of company governance, in word and active deed. But no chairman – even the most passionate advocate of doing the right thing – can embed ethical principles and effective governance practices without support from the CEO and other senior figures, including the company secretary.’

Published 18 October 2012

SOURCE: CCH Online

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