The shipping industry must adopt a transparent, proactive approach to corporate governance or else risk exposure to business and reputational damage, Robert Noye-Allen, a partner at UK accounting firm Moore Stephens has warned.
Corporate governance in shipping has been in sharp focus recently, particularly following publication of the research by Wells Fargo Securities into Shipping’s Corporate Governance War.
“Businesses in today’s shipping industry are expected to fully comprehend the implications of inadequate management of conflict of interest arrangements, and to recognise the importance of independent directorship,” Noye-Allen wrote in an article posted on the Moore Stephens website yesterday.
The UK Corporate Governance Code, for example, stipulates that at least half the board of directors, excluding the chairman, should comprise non-executive, independent directors. The proportions should be sufficient to mount adequate challenge where appropriate, and should appear in the governance disclosures in the company’s annual report.
“Independent directorship, good practice and transparent management can improve the confidence of investors and other stakeholders,” Noye-Allen wrote.
The “tone at the top” is key, he suggested. The board should make public when reporting any relationships or circumstances likely to affect the judgement of an independent director. Independent director recruitment ought to be transparent and skills-based. The reason for recruitment should be justifiable and the process auditable.
Potential conflicts of interest should be investigated as part of recruitment due diligence Noye-Allen wrote, and the continued effectiveness of decisions to appoint should be tested annually through board evaluation and individual director appraisal. An annually updated register of interests should be open to external scrutiny by stakeholders.
“These steps are an excellent way to inspire stakeholder and investor confidence in board transparency. Any shipping businesses which do not follow them should reflect that it is far better to disclose than to be exposed to potential reputational and share value damage,” Noye-Allen concluded.
Noye-Allen’s thoughts chime with readers of this site. In the latest quarterly survey carried by Splash, readers were asked whether ownership structures in shipping should become more transparent.
With just a week until the survey, dubbed MarPoll, closes 85% of the more than 500 respondents so far believe shipping structures do need to become more transparent.
Full results of the latest MarPoll will be carried in the next issue of Maritime CEO magazine, due out next month. Voting takes as little as two minutes and requires no registration. To vote in the survey, click here.
