Grant Thornton Corporate Governance Review 2010
Date: 02 March 2010This year’s Grant Thornton Corporate Governance Review of Irish plc's compliance with the Combined Code comes at a time when the Government is attempting to rebuild credibility in the Irish financial system after the banking crises of 2009. Complying with the Combined Code, or disclosing and explaining non-compliance, is a condition of listing on the Irish Stock Exchange. The Corporate Governance Review 2010 reveals that:
The number of companies claiming full compliance with the Code has dropped from 51 per cent to 36 per cent. Grant Thornton’s review reveals, however, that companies are being more transparent in disclosing and explaining the areas in which they are not applying the provisions of the Code.
More guidance is needed to assist companies in transposing the Code’s detailed requirements into meaningful disclosures in financial statements, so that users can readily ascertain where companies are not complying with the Code, and the potential impact of this.
A third of companies fail to disclose if they have reviewed the chairman’s performance, and 28 per cent of companies do not properly explain how the roles of chairman and chief executive are divided.
There has been a notable decrease in the number of companies reporting that the board is comprised of a majority of independent non-executive directors (down 10 per cent to 77 per cent), and over a third of companies are not properly disclosing the terms of appointment for their non-executives.
The regulatory system governing Irish listed companies is inappropriate to their needs and the needs of shareholders. There are currently several bodies involved in regulating listed entities and the country lacks a single, strong regulator. The regulatory system gives rise to overlapping and confusing rules, late and poorly planned transposition of EU directives and a lack of enforcement of existing regulations.
Reported levels of compliance with internal control and risk management guidelines are high, with most companies claiming to have the necessary structures in place. However, despite the questions being raised about the effectiveness of risk management and control in light of the financial crisis, explanations of compliance in this area continue to be brief, with companies providing shareholders with little detail on the specifics of how their risk and control functions operate.
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