UK - Increased scrutiny of companies' corporate governance arrangements could damage the public sector in the long-term, delegates at the NAPF's Corporate Governance conference heard.
Sir Nigel Rudd – who is chairman of Pilkington, the Boots Group and the Confederation of British Industry’s boardroom issues group – said the current focus on corporate governance was generally welcome but there were areas of concern.
He said: “The various codes on best practice have made managers think more about risk, made companies reconsider the composition of boards and non-executives reassess their responsibilities – all of which are good for company employees and customers.”
But he said a formulaic approach was not in the best interest of business and leading companies were already “well ahead of the game”.
Rudd warned there was a danger of managers “maxing out” by focusing on short-term remuneration targets rather than acting in the best long-term interests of the company and shareholders.
He claimed the drive for increased transparency of remuneration packages was also potentially detrimental to the public sector.
He said: “Disclosure is undoubtedly ratcheting up salary and bonus levels with people not wanting to be undervalued in comparison to their peers.
“A lot of senior managers are now choosing not to join the board as they do not want their salary open to public scrutiny. A talented pool of managers are now considering moving away from public-listed companies in favour of private equity.”
Rudd said specific recommendations in the combined code needed rethinking. He described preventing a chairman from sitting on the remuneration committee as “frankly silly” – except for discussions about his own position – and told delegates a number of firms were ignoring this.
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