THE IRISH stock exchange (ISE) has criticised a review of corporate governance by Grant Thornton that found that almost half of Irish plc’s were not fully compliant with corporate governance rules.
The ISE said there was a “disconnect” between the detailed findings of the report and the accompanying commentary, which it said was “regrettable”.
The report found that 19 Irish ISE-listed companies, out of a total of 39 companies surveyed, admitted that they were not fully compliant with the Combined Code of Corporate Governance. Signing up to this code is a condition of listing on the Irish Stock Exchange.
However, the ISE claimed the report showed there was “strong compliance with the key components of the Combined Code”.
The code, which the ISE said was considered “best practice” in corporate governance in Europe, “specifically states that good governance can be achieved by means other than those outlined”.
The Grant Thornton report has caused considerable anger among institutional investors.
“The implication that 50 per cent of quoted Irish companies are potentially corporate criminals, which is the implication in the headline of the press release, is at best unfortunate,” said a senior institutional investment source.
The ISE described the report as “a useful, albeit narrow contribution” to an ongoing debate. “Rules and codes can never be a substitute for good corporate culture and individual director integrity.”
However, the integrity of several individuals on the boards of Irish public companies has also come into question in recent months, with investors dismayed at a series of revelations about unorthodox hidden transactions.
Grant Thornton managing director Paul Raleigh admitted yesterday to being puzzled by the ISE’s reaction to the report and said it was clear that corporate governance needed to improve.
Mr Raleigh said that if elements of the code had been incorporated into law, former Anglo Irish Bank chairman Seán FitzPatrick would not have been able to assume that role because he had already served as its chief executive.
The code advises that a chief executive should not be permitted to become chairman of a company, because he or she cannot be sufficiently independent to act as an effective chairman.
Another issue raised by the report was the fact that Mr FitzPatrick had been sitting on the boards of four other ISE-listed companies at the time of his departure from the bank. Mr Raleigh warned that there was a perception at home and abroad that the boards of some companies valued “camaraderie over competence”.
Mr FitzPatrick was forced to resign his position as chairman after it was revealed that he concealed loans of up to €122 million by transferring them temporarily off the books of the bank using borrowings from Irish Nationwide.
