Auditing giant calls for compliance code change

ACCOUNTANCY and auditing giant Grant Thornton has called for a significant tightening of the loopholes in the existing Combined Code on Corporate Governance for publicly quoted Irish companies.

The call comes in the wake of recent high-profile instances of mismanagement, particularly at Anglo Irish Bank.

Currently, full compliance with the code is not enforced by legislation. It is a voluntary code for private companies. But the real bugbear is that while all public companies are obliged to sign up to the code, they can basically “cherry pick” the elements of it to which they wish to adhere.

The publication of Grant Thornton’s latest annual Corporate Governance Review for Irish Stock Exchange-listed companies has found that half of the country’s publicly listed companies are not fully compliant with the code.

Paul Raleigh, managing partner with Grant Thornton in Dublin, said that need for legislation making the full compliance of the code mandatory was now more urgent than ever before.

Mr Raleigh said that, as it stood, the code was “ineffective” if certain key aspects were not being included in legislation. According to the company, there should be a basic requirement for independent audit committees supported by a framework of effective sanctions for non-compliance; the chairman and chief executive of a company should be directly accountable for good corporate governance and transparency in financial reporting; and there should be a limit on the number of public company boards on which individuals can sit as non-executive directors.

Grant Thornton has suggested two as the possible number in the latter case.

“Companies are doing just enough to comply with the provisions of the code, whilst paying lip service to the spirit and values exemplified by good corporate governance,” Mr Raleigh said.

The latest Grant Thornton survey highlights cases of company boards not disclosing to shareholders possible risks to their business and how they plan to address them — which is required by the code.

“There will always exist the risk of bad corporate governance practice, but this is about minimising that risk and doing something about finding a solution to our problems and showing overseas investors that we are properly regulated,” Mr Raleigh added.