Chair tenure across the FTSE 350

Chair tenure across the FTSE 350

In July 2018 the revised UK Corporate Governance Code 2018 (UKCG Code) was published, which applies to accounting periods beginning on or after 1 January 2019. Amongst the recommendations is that the chair should not remain on the board longer than 9 years from their date of appointment to the board. Where this is not the case, the FRC states ‘this should be supported by comprehensive explanations which will help investors and other stakeholders better understand the long-term succession planning strategy.’

Market Tracker has conducted research into chair tenure periods across FTSE 350 companies with a financial year ending 1 April 2018 - 31 March 2019 (excluding closed ended investment funds).  The data showed that 33% of companies have a chair who has reached or exceeded the recommended tenure period, with a further 10% approaching the end of the recommended period within the next two years.

Of the company chairs who reached or exceeded the recommended tenure limit of 9 years, 12.8 % had been on the board for over 20 years. All 3 chairs that our research indicated had been on the board for over 40 years were involved in the founding of the company.

In several cases our research showed that although companies had only recently appointed their chair, they had already reached the 9-year point since the tenure period begins from the date of appointment to the board. A notable example is Crest Nicholson Holdings plc, whose chair Stephen Stone was appointed to the board in January 1999 yet was appointed as chair in March 2018. It will be interesting to note how companies in this position respond to the code changes next season, although it should be noted that the nine-year period ‘can be extended for a limited time, particularly in those cases where the chair was an existing non-executive director on appointment’.

Our research determined that disclosure in relation to chair tenure had been made when one of the following statements

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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.