Sir Adrian steps aside as monitor

BY MAGNUS GRIMOND

Sir Adrian Cadbury bowed out as monitor-in-chief of corporate governance last week heartened by the experience. He and his team on the Committee on the Financial Aspects of Corporate Governance found there had been a big increase in companies complying with the terms of the code he helped create in 1992.

Their findings are supported by a survey by Coopers & Lybrand, the accountants, which suggests the rate of compliance among listed companies had risen to 70 per cent in December from 55 per cent a year earlier.

But while Sir Adrian said a key part of his role was to provide the successor body, to be appointed next month, with the information on which to base its decisions, he and his fellow members gave little detail on what this body would do.

Sir Adrian said he did not want to tie the hands of his successors, but he did give a few clues as to where they might like to dig. "There would seem to be a major job to do in looking at what has happened, reactions to the code and examining smaller companies," he said.

He pointed out that the number of non-executive directors - a key part of the Cadbury code - tails off as company size diminishes.

Boards with three or more non-executive directors drop from close to 100 per cent in companies valued at pounds 1.4bn and above to under 40 per cent in companies capitalised at between pounds 1m and pounds 10m. Sir Adrian posed the question whether the guidelines were appropriate for the full spectrum of listed companies which looked to the public for money. He suggested size could be a legitimate issue for Cadbury mark two to look at.

Jonathan Charkham, a committee member and a non-executive director on several boards, also highlighted the role of unquoted companies, some of which were very large. Was it in the public interest, he asked, for suitable corporate governance structures to be established at such entities, given their importance to the communities in which they operate and the economy generally?

Another area of possible interest is whether it should be made easier for shareholders to put resolutions to annual general meetings. But perhaps of even greater interest to investors is the requirement that directors make a declaration on whether there are suitable internal controls within the company and provide confirmation that it remains a going concern.

On the question of directors' pay, Sir Adrian has passed the buck to the Greenbury committee. He admits there is "still some way to go" in openness on this subject.