Mutuals to be mauled over bad board practices

Click to follow
The Independent Online

Paul Myners, the chairman of Marks & Spencer, will deliver a scathing indictment tomorrow of the way Britain's mutual financial services companies are being run.

The former fund management chief was asked by the Treasury in March to look into corporate governance and management in the mutual sector. The request came in the wake of the Penrose report into the collapse of the life insurance group Equitable Life in 2001.

Lord Penrose exposed serious defects in the corporate governance structure of Equitable, which led to the life company's chief actuary having virtually unfettered control over the organisation.

Mr Myners is expected to report tomorrow that similar problems are endemic in a sector which looks after tens of billions of pounds of British people's savings.

Although some of the larger groups - such as Standard Life, Royal London and the Nationwide building society - will avoid the strongest attacks, many trusted institutions up and down the country will feel the force of Mr Myners' criticism of bad practices. These include weak boards, where one executive dominates, and a shortage of independent directors, with many mutuals having no executives that could be called "independent".

Many mutuals also have directors on contracts of two years or more, while many others fail to provide details of executive remuneration.

Mr Myners will call for corporate governance guidelines to be drawn up on a similar basis to the model code that has been used for many years by public companies.

His report will be the second published in the wake of the Penrose inquiry.

A team led by Sir Derek Morris concluded on Friday that there needed to be a big shake-up in the scrutiny of actuaries. The profession, which has great influence over pension funds, was found to have weak standards, leading to poor decisions being made on financial issues that affected millions of people.

Comments