Independence and composition remain
bugbears
The Combined Code on corporate governance continues to pose problems
for companies on issues such as independence and composition of committees.
Ashstead, the construction group, is in breach of the code due
to its long-standing non-executive director Philip Lovegrove. The Code
recommends that the longest a non-executive director should serve is 10 years.
Lovegrove was appointed in 1984. His inclusion in the remuneration committee
means that its composition is inconsistent with the recommendations of the
code.
Ellis and Everard, the chemicals company, has only addressed one
aspect of its internal controls, namely financial controls. The Combined Code
recommends that internal controls reports should cover all aspects, including
financial, operational and compliance controls and risk management.
Furthermore, the company's share price is currently 242p. The weighted average
exercise price of options for directors varies between 198p and 264p, meaning
that a number of options are currently underwater.
Northern Leisure also falls foul of the Combined Code on the
question of options with 53% of outstanding options being out of the money.
Executive directors of the company may also be invited to participate in an
incentive plan under which part of the bonus may be deferred and denominated in
company shares to be provided by the company subject to appropriate conditions
and a retention period of three years. These "appropriate conditions" have not
yet been specified.
The audit committee of Monsoon, the retailer; consists of just
two directors, Graham Frost and Graham Searle. It is, therefore, out of keeping
with the Combined Code's recommendation that audit committees consist of at
least three non-executive directors.
Macro, the software company is called into question on no fewer
than six corporate governance issues.
Shareholders are advised to note that there is no contractual limit on
the chief executive's position. The company has also failed to appoint a senior
non-executive director. Keith Piper is not considered independent due to his
long association with the company, having first joined in 1970.
The company has no recognised audit committee and justifies this by
saying that the company's auditors attend a full board meeting each year
shortly before the announcement of the year's financial results to discuss
matters arising from their audit. Macro does not have a nomination committee
and the composition of the remuneration committee is inconsistent with the
recommendations of the Combined Code.
Pifco Holdings admits that it finds it difficult to abide by the
Combined Code recommendations stating: "Wherever possible the group has tried
to conduct its business in accordance with the recommendations. There are,
however; certain areas of the Combined Code where compliance has either not yet
been established or could prove to be impractical."
Donald MacDonald, chairman of Edinburgh Small Companies Trust is
not considered independent as he is a director of Edinburgh Fund Managers, a
wholly owned subsidiary which is the company's manager and secretary.
Anuj Gangahar, Financial News
4 October, 1999
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