Pensions Investment Research Consultants Ltd. (PIRC) has published its response to the consultation paper published by Sir David Walker as part of his review of the governance of banks and other financial institutions. PIRC finds the the review's recommendations, overall, to be "a useful contribution to the improvement of corporate governance in the financial sector" but adds that some recommendations would not, as they stand, change behaviour. PIRC's response reveals a preference for greater reliance on compulsory provisions as well universal principles. For example, with regard to recommendation 36 - the remuneration committee chair should stand for re-election a year after a company's remuneration report receives less than 75% of the votes cast - PIRC suggests that it would be simpler to adopt the principle of annual election for all directors. This would permit concerned shareholders to vote against the remuneration committee chair in the same year as opposing the remuneration report.
PIRC also suggests that a limit should be set on the number of directorships that can be held: a non-executive director holding an executive directorship elsewhere should not be permitted to hold any further non-executive directorships; a non-executive director without executive responsibilities elsewhere should be permitted to hold a maximum of four non-executive directorships.
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