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UK company watchdog to study boards, investor advisers

[LONDON] Britain's corporate governance policeman will study whether boards are doing all they can to improve business standards and if investors get the best advice on voting at annual meetings.

The Financial Reporting Council (FRC) is acting after its 2014 review of how companies upheld the regulator's corporate governance code for boards, as well as the stewardship code for asset managers and other investors, still found failings.

Boards must think hard about how they can better assess whether the culture of their companies is the same as they espouse, especially when the firm is under pressure, FRC Chairman Win Bischoff said in a statement on Thursday.

There are also "increasing levels of concern" at companies and investors about the role of proxy advisers, which guide asset managers and shareholders on voting at company meetings. "It is essential that their advice takes full account of company circumstances and explanations, and it is based on the same level of engagement as is expected of their clients," the FRC said.

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Some proxy advisers take a "box ticking" approach. "Asset managers and owners are charged with accepting advice and voting without proper consideration," the FRC added.

Regulators want closer shareholder involvement to keep company boards on their toes. "During 2015 the FRC will assess how effective boards are at establishing company culture and practices, and embedding good corporate behaviour, and will consider whether there is a need for promoting best practice," Bischoff added.

Proxy advisers are under regulatory scrutiny elsewhere.

A draft European Union law being approved would force proxy advisers to disclose certain information about how they prepared their guidance, and US regulators have also taken action.

Full compliance by Britain's top 350 listed companies with FRC codes now stands at 61 per cent, up 4 percentage points on 2013.

Areas of non-compliance include combining the roles of CEO and chairman, whereas the code recommends splitting them.

The codes also recommend that over half of a board should comprise independent non-executives, a target not met by some companies.

The FRC said Britain was on course to reach this year a target set out by a government-backed report calling for women to account for a quarter of directors at the country's top 100 blue-chip companies, up from 23 per cent in 2014.

The number of female executive directors has also begun rising after a slow down.