Myers: No new legislation needed, but corporate governance must improve
In his long-awaited report into the governance of mutual companies, Paul Myers has said that he does not believe any new legislation is necessary.
However, he has called on all mutuals to adopt the corporate governance code and has suggested that the Financial Services Authority seek to enforce this.
Welcoming the report, Financial Secretary to the Treasury Stephen Timms said that he would be meeting industry leaders to urge them to begin implementing the report’s recommendations immediately.
He said the Government would review the impact of the proposals two years after the code comes into effect.
The Myers review was set up by the Government in the wake of the Penrose report in to the collapse of Equitable Life in 2001. Lord Penrose’s report was sharply critical of the corporate governance structure at Equitable Life, where the chief executive effectively had completely control of the organization.
Though today’s report does recommend changes, in particular an enhanced role for non-executive directors, it is not as critical as some commentators had expected.
Speaking today, Mr Myers, said: “The recommendations I am making today aim to achieve greater accountability by life mutuals to their members. In doing so I have looked to develop a package of measures to help improve accountability, recognising that there are limits on what can be expected of life mutual members. This includes measures to better enable other external monitors to scrutinise life mutuals, promoting better internal scrutiny of management by firm’s boards as well as the role of the Financial Services Authority.”
“The FSA has made considerable strides in recent years in recognising the importance of good corporate governance to good regulation. I hope it will take into account the lessons from this review as it further develops and refines its approach.”
It suggests that monitoring of risks should be come an explicit function of the roles of non-executive directors and there should be a “strong independent element” on all life mutuals’ boards.
Other key recommendations include greater engagement of members in the running of mutuals, through a “fair and accessible” voting procedures and the provision of better information on the running of the funs, including directors’ remuneration.
There will be a revision to the corporate governance code to relect specific issues facing mutuals – with the FSA expected to use adherence to this code as guidance in its risk monitoring process.
Mr Timms said: “Mutual life offices are an important part of the UK’s financial services sector, providing a home for the savings of nearly 10 million members. The way in which these organisations are run is important to the overall health of the economy as well as to the financial well-being of the individual policy holders concerned.”
He called on the industry to build on this report and “drive forward” its recommendations.
