The Financial Reporting Council (FRC) has suggested that the entire board of a company should be put up for re-election at the Annual General Meeting, as opposed to simply the chief executive.
While it’s fair to say that some support the move, organisations as diverse as the Association of Investment Companies, GlaxoSmithKline, Deloitte and Tesco have opposed it. Concerns range from encouraging short-termism to creating a further distracting box-ticking exercise for investors. Where shareholders do have serious concerns about a director, it is argued, there are already adequate procedures for forcing a vote on that individual’s re-election.
Given the opposition, it is doubtful whether this proposal will ever see the light of day. Nevertheless, given that Main Market regulation sets the tone for growth markets such as AIM, it’s a worrying turn of events.
While of questionable value for large quoted companies, annual re-election of directors would be yet another unnecessary burden for AIM at a time when many companies on the market are already struggling under its supposedly ‘light touch’ regulation.
Growth companies need continuity, and with sufficient mechanisms in place to deal with the few bad apples, forcing them to put all directors up for re-election every year would be a piece of pointless meddling that would make Messrs Sarbanes and Oxley proud.