PRESS RELEASE
17 February 2009
A comprehensive study of Irish plcs has found that half admit to being not fully compliant with the Combined Code on Corporate Governance.
Signing up to the code is a condition of listing on the Irish stock exchange.
The Grant Thornton research is being published at a time when Ireland’s international reputation has been severely damaged by a series of breaches of good governance in some of the country’s biggest companies.
The
Corporate Governance Review 2009, which will be formally launched by Fine Gael Deputy Leader Richard Bruton on Wednesday evening (18th February 2009), reveals that:
• Boards are failing to implement best practice in relation to the composition and independence of the Board of Directors. The report highlights incidences where: the Chairman and CEO roles are held by one individual, independent directors stay on longer than recommended, overstretched independent directors sit on several boards and instances where the CEO goes on to become Chairman.
• Company boards are failing to disclose to shareholders possible risks to their business and how they are going to address them, as required by the Code. Furthermore, more than one third of ISEQ listed companies have failed to identify the members of their audit committees who have recent and relevant financial expertise.
• Companies are doing just enough to comply with the provisions of the Code whilst paying lip-service to the spirit and values exemplified by good corporate governance.
Grant Thornton Managing Partner Paul Raleigh insists that allowing listed companies to opt in and out of sections of the Combined Code can no longer be sustained.
“The governance problems in both DCC and Anglo Irish Bank serve to highlight not only the damage that can accrue to individual companies who fail to meet a high standard, but also the damage to the reputation of Ireland as a transparent environment and attractive place to do business,” said Paul Raleigh.
“It is imperative that key provisions of the Code are now incorporated in legislation and that serious sanctions are drawn up for non-compliance.
“The Chairman and the Chief Executive of companies have to be held personally accountable for good corporate governance and transparency in corporate reporting.
“Furthermore we believe that there should be a limit to the number of boards of listed or public entities on which individuals can sit. And independent directors should also be required to demonstrate that they have the time commitment and skills necessary to carry out their role on a board.”
Mr Raleigh warned that there was a perception both at home and abroad that the boards of some companies valued “camaraderie over competence”.
“Ireland has a long road ahead if it is to regain international credibility after the recent controversies in some of our biggest companies. In five years time we will either be looking back and passing judgment on Ireland as a flash-in-the-pan economic success that couldn’t live up to its responsibilities or we will mark 2009 down as the year we put in place the measures that guaranteed our future economic success,” said the Grant Thornton Managing Partner.
“It would be a mistake for people to believe that just because they don’t hold shares directly in a company that board behaviour doesn’t affect them.
“If you have a pension you are an effective shareholder in listed Irish companies and, as we have seen, bad corporate governance on the part of a small number of boards can have a devastating impact on the reputation of the country as a whole.”
Mr Raleigh also called on the government to examine legislation that exists in other European countries which
requires the rotation of external auditors and the appointment of joint auditors to some systemically important companies.
95% of Irish plcs are audited by four firms, and just two firms audit 70% of these companies.
Mr. Raleigh claims that given this level of concentration it is not surprising that the public is questioning the independence of auditors.
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The Grant Thornton Corporate Governance Review 2009 was compiled in the last quarter of 2008, based on publicly available data for 39 listed Irish companies. Last year’s report was based on 32 companies. The purpose of this review is to gain an insight into the level of compliance with the Combined Code by Irish companies. The approach was to examine two main areas of corporate governance; the first being the level of full compliance with the Combined Code, the second being an examination of compliance with the principles and provisions of the Combined Code.
For a copy of the report email
monique.hogan@grantthornton.ie