Regulator calls out ‘poor’ board succession planning at FTSE 350 companies
The Financial Reporting Council (FRC) have called out listed companies for “poor reporting” on succession planning, board appointments and diversity, in a review of corporate governance reporting.
The FRC said companies provided “minimal information” to show how diversity and inclusion policies and objectives link to their business strategy.
The regulator said that while lots of companies used well-worn statements, such as “diversity is important” or “‘succession planning is a priority,” many of these declarations “were left unsupported” in the random sample of 100 FTSE 350 company reports it assessed.
Details such as timeline of the recruitment process, or how the business assessed what skills were needed on the board, were also missing.
The watchdog warned that the omissions raised deeper questions about how companies were planning to develop a more diverse boardroom.
There were 16 companies identified where the business chair was unchanged for at least nine years, something the regulator has previously warned against saying that long-term tenures can lead to group-think at firms.
Effective succession planning, the watchdog said, should foresee and prepare for risks such as the company chair and senior independent director leaving the board at the same time.
“The best governance reporting,” said chief executive of the FRC Sir Jon Thompson, “offers transparency that goes beyond broad-brush declarations and sets out clearly and concisely how the Principles of the Code were applied and the nature of compliance with the Provisions of the Code.”
“Board appointments, succession planning and diversity reporting remains weak,” he concluded.
“And in too many cases reporting has not provided insight into the actions and outcomes of governance, which provides investors and wider stakeholders with confidence,” he added.