New corporate governance rules
Published: 28 May, 2010
LONDON: Britain's listed companies will face tougher corporate governance rules from today, including new requirements designed to hold directors to account and to boost the number of women on boards.
Baroness Hogg, chair of the Financial Reporting Council, said the Corporate Governance Code would "reinforce board quality, focus on risk and accountability to shareholders".
The updated code requires directors of all FTSE 350 companies to stand for re-election every year and also introduces rules to align performance-related pay more closely to companies' long-term risk profiles.
In addition, the code sets out new duties for chairmen and non-executive directors, as well as guidance on how board members should be chosen. One new principle is that members of the board should be selected "on merit, against objective criteria, and with due regard for the benefits of diversity, including gender diversity".
The CBI also said much of the code was welcome. "However, we remain concerned that annual re-election may pose problems for larger companies," Richard Lambert, its director general, warned. "It could promote a focus on short-term results, make boards less stable and discourage robust challenges in the boardroom."