This legal update gives an analysis of the FTSE 350 commercial companies' 2011 AGM notices added to What's Market and highlights the new disclosure requirements under the UK Corporate Governance Code for the 2012 reporting season.
The UK Corporate Governance Code provides that all directors of FTSE 350 companies should be elected annually. The inclusion of this new provision caused much debate and controversy when first introduced in 2010. However, 18 months on, 80% of FTSE 350 companies (excluding investment trusts) have proposed annual re-election of the full board at their 2011 AGM.
This legal update provides an analysis of the FTSE 350 commercial companies' 2011 AGM notices added to What's Market and highlights the new disclosure requirements under the UK Corporate Governance Code for the 2012 reporting season.Close speedread
From a review of 291 FTSE 350 premium listed commercial companies (98 FTSE 100 and 193 FTSE 250 commercial companies) that were in the FTSE 350 as at 19 September 2011 and have published their AGM notice and held their AGM in 2011:
233 FTSE 350 companies (80%) have put their full board forward for annual re-election (for 203 companies (70%) this was for the first time).
86 FTSE 100 companies (88%) have put their full board forward for annual re-election (for 76 companies (78%), this was for the first time).
147 FTSE 250 companies (76%) have put their full board forward for annual re-election (for 127 companies (66%), this was for the first time).
Of those companies who have not put forward the full board for re-election, the majority have included an explanation for non-compliance.
As anticipated, very few companies have amended their articles to expressly provide for annual re-election. However, some companies have inserted new provisions to address the consequences of the number of directors re-elected being less than the minimum number required by the articles.
Full summaries of these companies' AGM notices and links to their notice, annual report and other AGM documents can be accessed from What's Market, AGMs: FTSE 350: 2011.
Looking forward to the 2012 reporting season, in light of provisions introduced into the UK Corporate Governance Code (Governance Code) in 2010 and 2011 and comments made by the FRC in its report on the implementation of the Governance Code (see Legal update, Corporate governance: FRC report on implementation of UK Corporate Governance and Stewardship Codes (www.practicallaw.com/8-516-2328)), companies will need to consider:
Whether the company should use an external evaluator for the evaluation of its board and, where an external adviser has been used, ensure the name of the adviser is reported in the annual report (Provision B.6.2).
Disclosing an explanation of the company's business model (Provision C.1.2).
Ensuring that the explanation regarding the board's responsibility for determining risk focuses on strategic and major operational risks (Provision C.2).
Disclosing details of their boardroom diversity policy (although this is a new provision which applies to financial years beginning on or after 1 October 2012, the FRC is encouraging early reporting, see Legal update, UK Corporate Governance Code: FRC announces changes to strengthen boardroom diversity (www.practicallaw.com/7-509-0964)) (amended Provision B.2.4).
Whether the board committees' chairmen wish to report personally and to ensure that the sections in the annual report provide more insight into why particular actions were taken, especially by the audit and remuneration committees.
In addition to the Governance Code disclosures, companies may also wish to consider the recommendations made by Lord Davies in his report "Women on boards" for inclusion in their 2012 corporate governance statement (see Practice note, Gender diversity in boardrooms: Timing of recommended actions (www.practicallaw.com/9-507-0502)).
For an annotated version of the Governance Code, see Practice note, Annotated UK Corporate Governance Code: Index (www.practicallaw.com/6-508-2403). For a guide to PLC's AGM and corporate governance materials, see Practice notes, A toolkit for annual general meetings (www.practicallaw.com/6-501-6168) and A guide to PLC's UK corporate governance materials (www.practicallaw.com/3-502-1005).