Board Intelligence has contributed to the FTSE UK Index Series Consultation, recommending that FTSE imposes a minimum free float of 25% for UK incorporated companies when determining eligibility for inclusion in the FTSE UK Index Series.
Board Intelligence works with a range of FTSE 100 and 250 listed entities to improve their governance standards and board effectiveness. We believe that there are three pillars to good governance; people, information and structures. Our particular area of expertise surrounds information: the information that goes to the boardroom to inform board directors, that enables them to duly steward and supervise the company and make robust strategic decisions governing the future direction of the organisation.
In our experience, there is considerable variation in the quality of information being provided to the boardrooms (in terms of scope and content), and the governance structures and culture in place. However, it is incredibly difficult to assess these governance standards from outside of a company.
We welcome the idea of an index which would identify those companies who have invested in intilling strong governance frameworks and cultures, but would caution against thinking simplistically about the criteria. Companies are tired of the flurry of recent governance requirements and it is key that any additional criteria is meaningful and does not simply become an additional compliance exercise. An index created without due consideration will not be effective if companies can easily ‘tick the box’ but ‘miss the point’.
Introducing an effective set of indices would encourage higher standards of corporate governance by providing recognition for companies that have invested in good governance. This should help ensure that the FTSE maintains its reputation for leading governance and would allow investors to have a greater insight into the company management. Recent governance failings have eroded the trust people have in boards, and listed companies should be incentivised to respond and raise their standards of corporate governance.
We would recommend that the index criteria builds on the recommendations of the 2010 UK Corporate Governance Code and would be happy to share our thoughts, should this be of interest.
