Headhunter urges governance shake-up

Institutions are becoming so obsessed with corporate governance issues that they are threatening the future of smaller companies.  
   
That is the view of Directorbank, a specialist in recruiting non-executive directors for public companies. It is recommending three fundamental changes to the way corporate governance is monitored.  
   
First, institutions should get together to agree a standard questionnaire, rather than each submitting a separate list of questions to every company in which they invest. Second, the questionnaire should be sent only to FTSE 350 companies, not to the remaining 2,000 smaller and Aim-traded companies. Third, company boards should structure meetings to concentrate on strategy and delivering results, demoting the priority often given to corporate governance issues.  
   
Sarah Grunewald of Directorbank said the agency had seen a surge in the fees demanded by non-executives, who were increasingly expected to act as policemen on compliance. Most candidates for non-executive positions were seeking to put something back into the world of business, not monitor rules and regulations. But a typical non-executive now spent 80 per cent of his or her time on corporate governance.  
   
"Fund managers are building up a huge industry based on corporate governance. They are in danger of losing the plot. If they want to see real growth in their funds, they've got to let the boards concentrate on strategy and delivering profits," she said.  
   
One of the smaller companies that chose to quit the market last year was Burndene Investments, which makes holiday homes in Hull.  
   
Ian Guthrie, of Bank of Scotland, said the company was spending so much time looking after institutional investors that it was distracted from running its business.