As part of our Year of Corporate Governance, we held our Corporate Governance Forum on 12 June 2018 at Haberdashers' Hall in central London, with over 80 small and mid-size quoted company directors in attendance.
Following the publication of the revised QCA Corporate Governance Code, the forum was particularly timely for small and mid-size quoted companies wishing to adopt good governance practices and comply with the recent changes to the AIM Rules for Companies – which will require all quoted companies to state which recognised corporate governance code they follow – coming into effect on 28 September 2018.
Please see below highlights from our first panel session, featuring:
- Will Pomroy, Lead Engager, Small-Caps, Hermes Investment Management
- Tracy Gordon, Director, Corporate Governance, Deloitte LLP
- Bob Beveridge, Portfolio Non-Executive Director
- Nick Naylor, Chief Executive, Allenby Capital
Session 1: The QCA Code in context: principles, disclosures and adoption
Will Pomroy, Associate Director in Hermes Investment Management’s Engagement team, chaired the first panel session at the QCA Corporate Governance Forum, which explored the ten principles of the QCA Corporate Governance Code, the accompanying disclosures and how small and mid-size companies can effectively adopt the Code.
Nick Naylor, Chief Executive at Allenby Capital, was keen to stress to smaller quoted companies that corporate governance could, and should, not be outsourced to their nominated adviser. He explained that nominated advisers could only pose the questions to companies; the companies themselves must take full ownership of their corporate governance arrangements. He added that with AIM companies being required to state which recognised corporate governance code they have decided to adopt by 28 September 2018, this would be more important than ever.
Tracy Gordon, Director – Corporate Governance at Deloitte LLP, agreed that companies must be proactive in adopting good corporate governance arrangements. She noted that a significant advantage of the QCA Corporate Governance Code is the flexibility available to companies to report the disclosures in the annual report or their website.
She noted that the QCA Code’s “apply and explain” ethos was a distinctive difference to the UK Corporate Governance Code and reflected the QCA Code’s practical, outcome-oriented approach.
Tracy emphasised that small and mid-size companies should see implementing good corporate governance as a core element to building a sustainable, long-term focussed business. She added that companies which view corporate governance as a burden were probably not doing it right.
Bob Beveridge, a non-executive director of three companies, including Brady plc, stated that the QCA Corporate Governance Code had been an essential tool in helping company boards pursue better corporate governance practices.
Reflecting on his own experiences as a non-executive director leading on corporate governance, Bob mentioned the need for all board members to be willing to provide an honest assessment of the company’s corporate governance arrangements, in order to enable any improvements to be made.
Bob added that hiring an investor relations specialist can be an effective way for companies to build and enhance their stakeholder engagement capacity – an area which often needs development for smaller quoted companies.
He also suggested that inviting investors to board meetings can be beneficial, as it gives them the opportunity to directly raise their concerns with both executives and non-executive directors.
Will noted that there were often too few disclosures given by smaller companies; he explained that the revised QCA Corporate Governance Code, jointly with the change to the AIM Rules, would support companies improve in this area.
He added that, with MiFID II’s impact on the research available to investors, small and mid-size quoted companies needed to capitalise on the benefits of the Code to tell their own unique story to investors.
In the Q&A segment of the discussion, there were differing views on whether the chair should always be ultimately responsible for a company’s corporate governance arrangements, or whether an alternative individual, such as the chair of the audit committee can assume this role. Bob indicated that while the whole board must be engaged with their company’s corporate governance arrangements, the best-placed person should be the board lead on corporate governance. However, Will noted that many investors generally expect the chair of the board to provide leadership on corporate governance affairs.
For more from the QCA Corporate Governance Forum 2018, see also: