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Fund manager attacks boardroom practices

One of Britain's biggest fund managers yesterday launched an attack on the widespread boardroom practice of chief executives stepping up to become chairmen without a break in between.

Hermes, which has pounds 32bn of funds under management, has taken the highly unusual step of writing to the heads of Britain's top 1000 companies, saying it is opposed to the practice. The only exceptions, it says, are where one of the independent non-executives is made deputy chairman or a senior non-executive director is nominated.

The appointment of a chief executive to the chairmanship is a familiar step in British boardrooms. Companies whose present chairman is a former chief executive include Glaxo, Sainsbury, Enterprise Oil, Lloyds Bank, Grand Metropolitan and ICI, where Sir Ronnie Hampel, head of the Hampel Committee on Corporate Governance, made just such a move two years ago.

An ICI spokesman said that even though it did not have a deputy chairman, its board did contain a number of very senior and independent-minded non- execs including George Simpson, the managing director of GEC, Sir Roger Hurn, the chairman of Smiths Industries, and Sir Anthony Pilkington, Pilkington's former chairman.

At Grand Metropolitan both Lord Sheppard and George Bull, his successor, have moved seamlessly from being chief executive to chairman of the food and drink conglomerate.

Hermes' statement on corporate governance and voting policies says that although little change is needed to the current regime, there are elements of the Cadbury and Greenbury codes which have "not yet been fully worked out in practice".

"This is the first time we have written to company chairmen setting out our overall policies and we are confident that general adherence to these principles will improve the long-term performance of UK plc," said Alastair Ross Goobey, Hermes' chief executive.

Hermes also wants newly appointed non-executives to attend "appropriate seminars" and urges experienced non-executives to help out in "development workshops".

Over three years all directors should be subject to re-election at least once, with at least one new independent non-executive introduced. "If non-executive directors continue to serve for more than 10 years they will not be considered independent."