AFM S CORPORATE GOVERNANCE CODE Martin Shaw Chief Executive, AFM - - PowerPoint PPT Presentation

Martin Shaw Chief Executive, AFM

AFM’S CORPORATE GOVERNANCE CODE

!

• “The Board was a self-

perpetuating oligarchy amenable to policyholder pressure only at its discretion”

• “Non-executives in mutuals face

particular challenges”

EVOLUTION OF THE CODE

LORD PENROSE EQUITABLE LIFE

• In 2000 the House of Lords ruled

that the society must honour the bonuses that it promised to 90,000 policy holders with Guaranteed Annuity Rates (GAR) pensions.

• “a mutual life office is no different from

any other type of enterprise in needing good governance”

• “The main task for non-executives is to

ask the right questions, and if they are not satisfied by the answers, to ask again and again”

• The principles in the (FRC’s) Combined

Code also provide the right basis for good corporate governance in mutuals”

EVOLUTION OF THE CODE

PAUL MYNERS

• Launched in 2005 by AFM’s two

predecessors

• Since 2011 complying is a condition of

membership of AFM

• Last updated November 2012
• FSA and HMT reviewed Code

compliance in 2009, and were content with self-regulatory approach

• Similar approaches by building societies,

co-operatives, and credit unions

EVOLUTION OF THE CODE

THE ANNOTATED CODE

SECTIONS OF THE CODE

Leadership

Effectiveness Accountability Remuneration

Relations with members

SECTIONS OF THE CODE

Leadership Effectiveness Accountability Remuneration Relations with members

19 main principles 53 code provisions

COMPLY OR EXPLAIN

53 code provisions AFM compliance questionnaire YOUR report and accounts Approach recognises there are legitimate reasons for non-compliance

COMPLY OR EXPLAIN: SMALLER MUTUALS

Code recognises smaller mutuals may ‘judge some

• f the provisions disproportionate or less relevant’

Should try to avoid using size alone as a reason for not complying Should consider how to adopt the spirit of the provision A ‘comply or explain’ statement should make clear what has prevented compliance

COMPLIANCE PROCESS

AFM publishes aggregated report Summary of questionnaire send to AFM Response reviewed by Board/ approved by Chairman Executive completes AFM questionnaire

HIGH STANDARDS OF COMPLIANCE, 2011

0 ¡ 5 ¡ 10 ¡ 15 ¡ 20 ¡ 25 ¡

under ¡ 70% ¡ 70 ¡to ¡ 79% ¡ 80 ¡to ¡ 89% ¡ 90 ¡to ¡ 99% ¡ 100% ¡

Compliance levels: all principles

80 90 100 relations with members remuneration accountability effectiveness leadership

Compliance by section

BOARD COMPOSITION, 2011

5 10 15 20 25

Total Directors and NEDs

Number of non-executive directors all directors 0% 10% 20% 30% 40%

proportion of female directors

LOOKING AHEAD

• Chairman’s statement
• Gender policy
• Focus on fair, BALANCED and understandable reporting
• Audit commitment requirements

2012 changes to the Code take effect now, including:

• New AFM ‘governance microsite
• Simpler to complete and easier to navigate
• Sits alongside our regular Remuneration Report

Overhaul of compliance exercise

• New regulators
• EU review of ‘comply or explain reporting
• Government action on remuneration

External focus on governance to continue

Martin Shaw, martin@financialmutuals.org www.financialmututals.org

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