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FTSE-350 still failing ‘comply or explain’ test on combined code

Two-thirds of the UK’s 350 biggest companies still don’t claim full
compliance with the provisions of the combined code of corporate governance,
according to research carried out by Grant Thornton, with just 10% providing the
appropriate explanations when they do not comply.

While there has been an improvement on the level of compliance from last
year, the figures are still relatively low, with just a 2% improvement among the
FTSE-100 and 8% for the FTSE-250.

According to Simon Lowe at Grant Thornton, non-executive directors have a
responsibility to “stand and challenge the board to clarify why departure is
better for the company and their stakeholders than full compliance”.

The most common areas for departure from the code were with the terms and
conditions of the appointment of non-executives, certain aspects of internal
controls and audit committee independence and financial experience. Because
internal control relies on companies applying judgement rather than applying the
code as a straight yes or no, discrepancies can creep in.

It wasn’t, however, all doom and gloom, with some key areas of improvement –
notably with the description of the work that nomination committees undertake
and disclosure relating to the annual performance appraisal of the chairman.

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