Study finds high level of compliance with code of corporate governance

THERE IS a high level of compliance with the Combined Code on Corporate Governance within Irish companies, according to a report commissioned by the Irish Stock Exchange and the Irish Association of Investment Managers.

The finding comes two days after a similar report by Grant Thornton concluded that the number of listed companies claiming full compliance with the Combined Code had dropped from 51 per cent to 36 per cent in 2008, although the earlier report stressed that Irish companies were becoming more transparent about explaining the reasons for not complying with the code.

Irish companies are required to meet the Combined Code on a “comply or explain” basis, which means that while listed companies are not required to comply with all provisions of the code, they must provide explanations if they are not meeting certain provisions.

Yesterday’s report surveyed 29 companies which have their primary listing on the Irish Stock Exchange.

Ten of these companies displayed full compliance with the code without any explanation being required, while 19 exhibited “compliance through explanation”.

The report recommended that companies should make fuller disclosures on compliance.

Prof Niamh Brennan, chairwoman of the review panel which oversaw the report, said that while its findings indicate high levels of compliance with the code, companies need to “enhance the quality of their disclosures and to make their disclosures more meaningful to investors”.

Prof Brennan said that while recent corporate instances have undermined confidence in Ireland’s corporate culture, they have also led to “rising expectations” from shareholders and investors, who are now demanding greater transparency and disclosure from company boards on issues of corporate governance.

“The key challenge faced by boards is to meet rising investor expectations by providing more meaningful disclosures in their annual reports and to ensure the underlying behaviour of the board supports the company’s corporate governance structure,” she said.