Financial Reporting Council recommends changes to corporate governance
In a move which will no doubt give more powers to shareholders in the UK the Financial Reporting Council has today revealed a proposed revision to the corporate governance code which would see directors of FTSE350 companies re-elected on an annual basis. If the move is backed by all listed companies in the FTSE350 then we could see the revision in place by the end of June this year.
While there's no doubt of the need to make directors more accountable to shareholders there is concern in some business quarters that long-term planning could become more difficult if directors are up for re-election on an annual basis. There will be tough times within any company's history and ultimately shareholders may well look for some form of scapegoat. However, tomorrow's scapegoat could well be next week's hero so shareholders will need to be careful what they wish for!
This proposed change in director election guidelines is likely to be the first of many to hit the UK business arena in the short to medium term. As long as these powers are used in the correct way there should be no detrimental impact to shareholder value or a company's long-term prospects. We will see!
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