UK - Pensions scheme activism would affect corporate governance more than increasing the role of non-executives, a Pensions Investment Research Consultants'.
Rentokil senior non-executive director Brian McGowan said he would be “uncomfortable” with a move to make the position of the non-executive director stronger.
He felt non-executives would lose their independence if they worked more than one day a week and were more involved at a higher level.McGowan also warned pension funds not to rely too much on the non-executive to fight their cause. Independent directors, he said, only knew what the executives told him.
He added: “The institutions should be rattling the cage, not the independent directors. The creation of the senior role is an admittance of failure. Apart from clogging up the decision process at board level, the non-executive position would become more in line with that of a director.”
Consolidated Goldfields former managing director Allen Sykes claimed that the appointment process meant that non-executives’ independence was compromised.
Sykes said: “Non-executives are chosen by the executives, so they owe their loyalty to the chief executive. There is a large conflict of interest here.”
He added that shareholders should nominate the non-executives to a board to ensure independence.
But Vodafone non-executive director Penny Hughes disagreed: “Why would the shareholder be in a better position to bring judgement to this position? It is the chairman who understands the qualities in the boardroom.”
She claimed that if non-executives were voted in by shareholders it would damage their position of neutrality on the board because other directors would perceive them as a watchdog for shareholders.
This week's edition of Professional Pensions is out now.
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