Pirc calls for City body to monitor companies

A leading corporate governance consultancy is calling for a permanent City body to monitor the way companies are governed as it fears a "self- regulation approach" will fail to make companies sufficiently answerable to shareholders.

The move comes from Pirc, the pensions and investment research consultants, ahead of the final Hampel report on corporate governance, due to be published on Wednesday.

The report is expected to include few significant changes to the draft report last August. It was described as a "missed opportunity" by Pirc because it favoured a common-sense, flexible approach to corporate governance. The draft study criticised the use of rigid codes or rulebooks, saying they pushed the debate away from business prosperity. The final version is expected to be equally "company-friendly".

Pirc is lobbying for a Companies Commission responsible for corporate governance that would be able to commission research and publish guidelines on good practice.

Pirc's Alan MacDougal said that without some kind of over-arching official body, the flexible approach favoured by Sir Ronnie Hampel, the ICI chairman, would prove difficult to regulate. "You can't monitor principles. You have to have codes," he said.

Pirc is in favour of shareholders having greater powers to monitor companies. It wants entire boards to be required to stand for re-election each year. It also wants greater disclosure about directors that are standing for re-election.

Sir Ronnie said in the summer that he had no desire to make history with his report. The main suggestions of the draft version were that non-executives should form at least one third of the board and that companies should use their annual meetings more effectively by including a presentation to shareholders.