Independence guarantee

LONDON - Corporate governance at UK companies is improving but the practice of chief executives becoming chairmen should remain an exception to the rule, the Association of British Insurers says.

"Investors believe it really should be exceptional for chief executives to become chairmen," said Stephen Haddrill, head of the association, whose members own 20 per cent of UK shares.

"The fact that the market has accepted explanations on this particular issue does not mean the corporate sector should feel it is business as usual here."

Britain's Combined Code, which sets out rules for listed companies' relations with their shareholders, recommends against the promotion of chief executives to the chairmanship in order to guarantee the post's independence.

Under the code, companies that elevate their chief executives to chairman must explain why.

Under pressure from the association, British bank Barclays was forced to explain publicly in 2003 why it appointed its former chief executive, Matt Barrett, as chairman.

British-based HSBC, the world's third-largest bank, is widely expected to appoint its chief executive Stephen Green, as chairman when John Bond retires. HSBC, which has a long tradition of choosing internal candidates for its chairmanship, has said before that the code would not alter its succession arrangements.

The code was revised in 2003 after accounting scandals at US giants such as Enron, Worldcom and Global Crossing and is up for a formal review shortly. Companies had to adopt the new code in 2005.

Haddrill said compliance was improving, with 45 per cent of FTSE 100 companies reporting full compliance.

- REUTERS