The number of listed companies claiming full compliance with the Combined Code on corporate governance has dropped from 51 per cent to 36 per cent according to a report published by accountancy firm Grant Thornton today.
A third of companies fail to disclose if they have reviewed the chairman’s performance, while 28 per cent of companies do not properly explain how the roles of chairman and chief executive are divided according to the report which analysed publicly available data on 36 companies listed on the Irish Stock Exchange.
However, the report found that companies are being more transparent in disclosing and explaining the areas in which they are not applying the provisions of the Code.
Complying with the Combined Code, or disclosing and explaining non-compliance, is a condition of listing on the Irish Stock Exchange.
The report called for more guidance for companies to assist them in transposing the Code’s detailed requirements into meaningful disclosures in financial statements.
The importance of the company board to sound corporate governance was also stressed in the report. It found that there has been a notable decrease in the number of companies reporting that their board is comprised of a majority of independent non-executive directors -down 10 per cent to 77 per cent. In addition, a third of companies are not properly disclosing the terms of appointment for their non-executives.
Managing Partner with Grant Thornton, Paul Raleigh called on listed companies to look at how they assess the quality and competence of their Boards.
“Whether it’s a legislative solution or the “comply or explain” approach advocated by the Combined Code, it is clear that it is the behaviour of boards, and in particular of their leaders, that ultimately determines the corporate governance culture of a company,” he said.
He also highlighted the “critical role” a chairman should play in the leadership, management and development of a board “which is why there needs to be a clear distinction between the role of the chair and the chief executive,” he said.
“The focus of the debate should now be on how boards can be strengthened, and what structures and processes at board level are likely to produce the optimal corporate governance practices.”
The report also found that shareholders’ needs are not being met by the current regulatory system which governs Irish listed companies. Despite the fact that reported levels of compliance with internal control and risk management guidelines are high within companies, the report found that companies provide shareholders with little detail on the specifics of how their risk and control functions operate.
