U.K. institutional investors give poor marks to independent directors, according to a survey by BDO Binder Hamlyn, London-based accountants.
The survey was designed to measure the effectiveness of non-executive directors in overseeing activities of British companies. It found 84% of institutional investors believe these directors should be responsible for maintaining high standards of corporate governance. But only 41% believe the directors have done a good job.
They view directors as ineffective because of: a dominant chairman or chief executive; directors' inadequate understanding of the firm's business; lack of consultation with executives; inadequate information given to directors on corporate developments and financial performance; and lack of time spent on the job. Directors say they spend an average of 20 days a year on company business.
But 84% of institutional investors and 63% of financial executives believe the most important factor was that directors aren't qualified. Nearly four-fifths of those surveyed felt a top-level management job was the best background for serving as a director.
Also, three-quarters of the executives from Financial Times-Stock Index 100 companies are unsure whether having an audit company has helped achieve sound corporate governance, while 89% of directors believe such committees are helpful.
And 53% of institutional investors believe directors should stay in close contact with major institutional shareholders, but only 38% of FTSE 100 executives think directors should do so.
