Fund giant Morley warns firms over succession plans

One of the UK's biggest fund managers has warned top companies it will not support them unless they adopt stringent polices governing management succession and environmental responsibility.

One of the UK's biggest fund managers has warned top companies it will not support them unless they adopt stringent polices governing management succession and environmental responsibility.

Morley Fund Management, which has assets of more than £118bn, has written to the chief executives of Britain's 350 largest publicly quoted companies setting out its toughened corporate governance targets.

The letter, by Morley's head of corporate governance, Anita Skipper, says Morley may not support boards at annual meetings unless there is evidence they have adopted a more progressive approach to issues such as auditors' duties to shareholders, clear succession strategies and the separation of the roles of chairman and chief executive.

For the first time, Morley will include social and ethical issues alongside environmental criteria in its corporate governance requirements. It is "writing to FTSE 350 companies in advance of their AGMs to inform them of our voting intentions on SEE [social, environmental and ethical] disclosure so that companies are given an opportunity to respond".

Morley says: "While we recognise that the role of chairman might not fall into the classic concept of a non-executive director, we are detecting a trend in combined roles and an increase in executive chairmen." It wants more non-executive chairmen on boards.

While executive chairmen are relatively uncommon in the UK, the roles of chief executive and chairman are often combined in US companies. A spokeswoman for Morley could not confirm it would adopt the same policy with its US investments, where there is greater resistance despite a succession of corporate scandals.

Succession issues tend to be most common at companies dominated for a long time by individuals, but Morley believes "companies should confirm to shareholders that such arrangements [for a swift and problem-free succession] are in place".

Issues over succession have been seen most noticeably at British Land, where John Ritblat's successor was in question until Stephen Hester was poached from Abbey, and at Wm Morrison, where the 76 year-old Sir Ken Morrison remains the dominant force in the business.

Morley also says executive share option schemes should be "clearly linked to rewarding ongoing performance that creates shareholder value".

Corporate governance issues have become an increasingly important part of fund management, due to the large number of scandals that have rocked the financial world.