AIM non-executives poorly managed

Smaller quoted companies, mostly listed on AIM, are failing to manage their non-executive directors (NEDs) effectively, according to research.

NEDs are inappropriately remunerated, ill-trained and poorly prepared for board meetings, says the survey from City law firm Speechly Bircham and the Quoted Companies Alliance (QCA).

The study finds that over one in seven (14 per cent) NEDs of smaller companies are paid in share options. This goes against corporate governance guidelines which state that non-executive board members’ independence may be compromised if their remuneration is linked to the performance of the company.

Training is another area of concern, with AIM NEDs significantly less well prepared for their responsibilities than their counterparts on the Main Market. For example, only 66 per cent of AIM non-executives feel adequately trained in risk management, compared with 88 per cent on the Main Market.

A large minority (42 per cent) of AIM NEDs state that they receive no formal evaluation of their performance, while over a third fail to receive board papers in a timely manner ahead of board meetings.

Tom Shaw, head of equity capital markets at Speechly Bircham, comments: ‘Performance without evaluation, remuneration policies linked to share options or simple lack of basic knowledge of key areas of regulation can jeopardise the independence and effectiveness of non-executive directors and increase the chance of the wrong decisions being made.’

The research, based on interviews with 157 listed companies, also finds that just over half (53 per cent) of non-executives on AIM boards receive annual fees of at least £25,000, while one in five (20 per cent) receive less than £20,000.

Click here to find out more about directors’ pay on AIM.

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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