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ITEM PF14
- ANNEX 1
PENSIONS
FUND COMMITTEE – 21 FEBRUARY 2003
SOCIALLY
RESPONSIBLE INVESTMENT AND CORPORATE GOVERNANCE ISSUES
The Main
Recommendations on the Review of the Role and Effectiveness of Non-Executive
Directors (Higgs Review)
- No individual
should be chairman of more than one FTSE100 Company.
- At least half
the members of the board should be independent non-executive directors.
- The roles of chairman
and chief executive should be separated.
- A chief executive
should not become chairman of the same company.
- Non-executive
directors should meet at least once a year without the chairman or executive
directors present.
- A non-executive
director should usually serve no more than two three-year terms.
- The pool of candidates
for non-executive directorships should be broadened.
- A full-time executive
director should take on no more than one non-executive directorship
and should not be chairman of another FTSE 100 company.
- Companies should
indemnify non-executive directors against legal action, and ensure they
have appropriate insurance cover.
- One senior non-executive
director should be available for shareholders to contact over concerns.
- Non-executive
directors should have more training, and their pay should reflect the
enlarged role.
The Main
Recommendations of the Financial Reporting Council
Review on
the Role of Audit Committees (Smith Report).
Audit
Committees should: -
- Ensure the company’s
auditors are independent, objective and do a thorough job.
- Include at least
three independent non-executive directors and they should get extra
pay to reflect the importance of their work. At least one member should
ideally have a professional accounting qualification, together with
relevant financial expertise, possibly as an auditor or company finance
director. The other members should have a degree of financial literacy.
- Take an adversarial
approach to management if it discovers poor or misleading financial
reporting.
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