VISION AND LEADERSHIP While the recommendations indicate that companies should be covering many of Davies’ recommendations in their 2012 governance statements, regardless of whether the Code has been amended, we have seen indications that some companies are already addressing the issue of diversity. A small number stated in their Annual Report the level of female representation they were aiming for within the company and some even addressed Davies’ request for the diversity policy within the nominations procedure to be explained. The external influence for companies to act in this area will be significant, particularly when one considers that the initial consultation elicited over 2,500 responses. What remains a concern for female representation is the size of the pool from which companies are recruiting their Directors. Research conducted by Black Sun in March 2011 showed a pool of 124 women occupying 146 Board positions – clearly this will need to be addressed if Davies’ targets are to be met by 2015. Demonstrating Board effectiveness With the publication of updated guidance on Board effectiveness by the Financial Reporting Council, companies will need to consider how their reporting reflects some of the issues raised, such as the roles of the key figures on the Board and the evaluation of Directors. The vast majority of companies include some detail regarding their evaluation processes, though the extent to which this is done varies significantly. Some companies go into considerable detail about the specific issues raised by the evaluation and how they intend to address them, while others stick to a more basic description confirming that an evaluation has been conducted but provide very limited detail about its outcomes. The provision within the new UK Corporate Governance Code recommending that companies carry out an external evaluation every three years has also drawn attention to this area of corporate governance and, interestingly, our analysis indicates that over 50% of companies conducted an external evaluation in the current reporting year or have committed to doing so within the next three years in accordance with the Code. Whether the updated guidance on Board effectiveness results in an improvement in the quality of disclosure around the evaluation process still remains to be seen, though early indications are that the best reporters are starting to provide much more detail in this regard. One of the other ‘major’ changes brought in by the new Code, which attracted considerable criticism and press coverage, was the subject of annual re-election of Directors. Surprisingly however, nearly 60% of companies stated that all Directors would be subject to re-election at their forthcoming AGM, or committed to complying with the Code when it formally applied to their reporting year. Either companies see the ‘good governance’ benefits of annual re-election or, more cynically, they are of the mindset that the appointment of new Directors is seldom subject to significant or meaningful shareholder opposition and therefore compliance is the easier option if it negates any negative publicity. GOVERNANCE MARKET TRENDS AND OUTLOOK BUSINESS DESCRIPTION STRATEGY RISK CORPORATE RESPONSIBILITY Figure 2.13 How many companies are outlining evaluation processes? 92% 79% 71% 71% Figure 2.14 Figure 2.15 Is there a commitment to external evaluation every 3 years? Are, or will, all Directors be subject to annual re-election? PERFORMANCE 55% 58% www.blacksunplc.com © Black Sun Plc 2011 APPROACH TO REPORTING Board as a whole Individual directors Individual committees Chairman 13
