The UK Governance Code 2016 & Chairmen

In its 2016 AGM results announcement, Sky plc suggested that shareholders voted against James Murdoch because of proxy analysts rather than facts surrounding Murdoch’s appointment.

As a UK incorporated Plc, Sky’s governance arrangements fall under the remit of the UK Governance Code which is maintained by the Financial Reporting Council, the UK’s independent regulator for corporate reporting and governance. The FRC has a memorandum of understanding with the Department of Business, Energy & Industrial Strategy, in respect of company law and accounting issues. This is what the UK Governance Code says about board chair appointments:

Principle A.3.1 Board Chair Appointments

“The chairman should on appointment meet the independence criteria set out in B.1.1 below. A chief executive should not go on to be chairman of the same company. If exceptionally a board decides that a chief executive should become chairman, the board should consult major shareholders in advance and should set out its reasons to shareholders at the time of the appointment and in the next annual report.”

Provision B1.1.1 Independence Criteria

“The board should state its reasons if it determines that a director is independent notwithstanding the existence of relationships or circumstances which may appear relevant to its determination, including if the director:

• has been an employee of the company or group within the last five years;
• has, or has had within the last three years, a material business relationship with the company either directly, or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company;
• has received or receives additional remuneration from the company apart from a director’s fee, participates in the company’s share option or a performance-related pay scheme, or is a member of the company’s pension scheme;
• has close family ties with any of the company’s advisers, directors or senior employees;
• holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;
• represents a significant shareholder; or
• has served on the board for more than nine years from the date of their first election.”

This information was correct as @ time of first publication 15th October 2016

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Last Updated: 15 October 2016