Byline: Kit Bingham
Pirc, the shareholder voting adviser, has published guidelines outlining how it will assess companies' governance practices.Pirc is demanding tougher governance policies in some areas other than those suggested by the recent Higgs and Smith reports on non-executive directors and audit committees.
In particular, Higgs's effort to establish a single, authoritative definition of director independence has been thwarted by Pirc, which will continue to assess boards using its own, tougher standards.
Stuart Bell, director of research at Pirc, whose institutional investor clients represent more than pound sterling500bn ([euro]745bn) worth of assets, says that competing opinions on vital governance questions was inevitable. "In reality, we're dealing with a market for ideas. It's never going to be the case that all institutions and advisers agree and it would be a sad day for governance if they did," he says.
Pirc's judgment of what constitutes an independent director tallies with the Higgs definition in most cases but includes additional factors, such as whether a director holds a senior position in a charity, to which the company donates, or whether he or she has worked for a customer or supplier to the company.
Pirc also wants board nomination committees to be made up solely of independent directors, a tougher standard than the Higgs report which called for an independent majority.
The new guidelines, which have been sent to every company in the FTSE All Share index, call on companies to disclose the number of meetings that the non-executive directors hold annually without executives present, as well as attendance rates at them. …