On 17 December 2010, the Irish Stock Exchange ('ISE') published new listing rules requiring all companies with a primary listing on the Main Securities Market of the ISE to comply with a new annex to the rules focussed on corporate governance matters (the 'ISE Annex'). This development follows the publication last year of the new UK Corporate Governance Code ('UK Code'). The UK Code has been incorporated into the ISE's listing rules. Gerry Beausang considers the implications of the heightened compliance standards on both fronts for ISE listed companies.
The UK Corporate Governance Code
In May 2010, the Financial Reporting Council in the United Kingdom published the UK Code, a document updating and amending the earlier Combined Code on Corporate Governance 2008 (the 'Combined Code'). The revisions to the Combined Code came about in the wake of economic decline since the last review which was finalised in 2007.
Some of the key changes contained in the UK Code are:
Annual re-election of the members of the board of directors. External board evaluations at least once every three years. Any connection between the company and the body conducting the review must be disclosed. Ensuring the performance-related elements of executive directors' remuneration are designed to promote the company's long term success, while discouraging performance-related remuneration packages for non-executive directors. The adoption of the UK Code is important, not only to provide for higher standards in corporate governance in Ireland, but also to boost international investor confidence in the Irish market. This is because the UK Code is internationally regarded as the pre-eminent corporate governance standard, a fact which the ISE has specifically acknowledged.
The ISE listing rules oblige every company listed on the Main Securities Market to state in its annual report whether it has complied with all of the provisions of the UK Code and to set out the nature, extent and reasons for non-compliance. In a veiled shot across the bows of listed companies, the ISE has stated that it feels that companies could do more to 'enhance the quality and meaningfulness' of their corporate governance disclosures in annual reports. Specifically, the practice of recycling descriptions that replicate the wording of the UK Code or the ISE Annex is now frowned upon. Companies should now aim to provide shareholders with more insight into the company and the environment in which it...