Almost a third of the UK’s top companies are not conforming to the new
combined code on corporate governance, according to a new report.
The survey by Deloitte shows that 31 per cent of FTSE 350 companies are
failing to comply with a best practice proposal that requires at least half
their board members to be independent non-executive directors (NEDs).
Under the new code, which comes into force on 1 November and incorporates
the recommendations on better corporate governance from Derek Higgs, companies
must either comply with its requirements, or explain why they won’t.
According to Deloitte, non-compliant businesses would have to appoint 126
more NEDs to comply with the proposals, while a further 240 NEDs do not pass
the independence criteria as they were appointed more than 10 years ago.
Patricia Peter, corporate governance executive at the Institute of
Directors, said the balance was moving in favour of independent NEDs, but that
the process would take time.
"The combined code never expected companies to make an immediate and
wholesale change," she said.
"However, investors will not spend money with companies that choose to
show a blatant disregard for the code."
The report also shows that 30 per cent of FTSE 350 chairmen would fail the
independence tests, as they also act as executive directors.