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Recent Paper

REVUE FRANÇAIS DE GOUVERNANCE D'ENTREPRISE – Journal of the Institut Français des Administrateurs' (IFA)

In January 2008 Professor John Mellor, who has been elected a member of the IFA's Conseil Scientifique, had a paper published in the IFA Journal, titled “The UK Combined Code on Corporate Governance and its application to smaller quoted companies.”

This paper is divided into three parts, beginning with a short explanation of the United Kingdom Combined Code on corporate governance, followed by its application to UK smaller quoted companies, and concluding with some results of preliminary corporate governance research by the author.

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Foundation Publications

CORPORATE GOVERNANCE RESEARCH ON
SMALL AND MID CAP QUOTED COMPANIES
sponsored by the Quoted Companies Alliance
conducted by Professor John Mellor MBA Ph.D
January 2006 

RESEARCH EXECUTIVE SUMMARY

“Corporate governance codes and the regulation of small and mid caps should be driven by a vision of a thriving and competitive small and mid cap sector of the economy. This vision should determine the objectives for code and regulatory developments. Codes and regulations are not an end in themselves but a means to an end.” Professor John Mellor , author of the report

This research has been carried out on a sample of small and mid cap quoted companies and investigates their relationship with institutional investors in the UK . It is supplemented by preliminary work in France and Germany .

1. The research has highlighted the following:

In the UK

• Whilst there is significant ‘buy in' to the Combined Code by small and mid caps, their concern is that the way it is applied is something of a burden to be carried, discouraging entrepreneurship and growth.
• The dialogue between institutional shareholders and the boards of small and mid caps needs to be improved so as to underpin the ‘comply or explain' regime.
• Application of the Code is not sufficiently tailored to meet the varying circumstances of small and mid caps.
• The relationship between corporate governance and access to and cost of capital, whilst unclear, is not dismissed, particularly for growth small caps and mid caps.

In France

• An increased focus on corporate governance in the small and mid cap sector is emerging.

2. Key issues for the future arising from this research :

• The application of governance codes needs to be more discriminating so as to respond to the circumstances of small and mid caps, focusing on support for innovation, growth and competitiveness.
• The codes and their application should facilitate investment in small and mid caps in the EU by increasing cross-border flows through integration of the European capital markets.
• The application of governance codes should be balanced by a regulatory framework fitted to the circumstances of small and mid caps.
• Improved dialogue between institutional shareholders and boards of small and mid caps is required.
• The place for a single corporate governance committee of the board, responsible for a company's governance.

3. Conclusions and ongoing research in the small and mid cap quoted sector

In order to address the issues of dialogue and flexibility in the use of the Code in the UK , some criteria and practical steps are indicated. The following fundamental questions arise and are the subject of ongoing research:

• To what extent do company ownership structures and stage of development influence governance structures and practice, and therefore the application of codes, and what should this mean for investors?
• What are proper and workable bases and guidelines for constructive dialogue between company boards and investors?
• What can be learnt from a comparison of the application of corporate governance and the Codes of the UK , France and Germany in their respective countries, taking into account different company ownership structures, in order to identify the implications for policy making at EU level and assist the development of national codes?
• What relationship exists between corporate governance and cost and access to capital?

NB: Full copies of the Report are available on request

A GUIDE FOR NON-EXECUTIVE DIRECTORS IN THE PRIVATE AND PUBLIC SECTORS foundation fidirs publications no.1 - June 2004

by Professor John Mellor MBA Ph.D, Chairman and Founder of the Foundation for Independent Directors and Visiting Professor of Corporate Governance at Bristol Business School

"Introduction

It is widely accepted that non-executive directors are the custodians of the governance process in publicly listed companies and can play a useful role on the boards of private companies and other entities in both the private and public sectors. The demands of the role, however, give rise to profound implications not only for the levels of professionalism and commitment required to be effective but also for the process of recruitment, appointment and diversity in the range of candidates. The Government initiated Higgs Review of the Role of Non-Executive Directors sought to address these, and other, issues and its conclusions, with a few exceptions, have been drawn together in the new Combined Code published in July 2003 and applying from 1 st November 2003. The Code applies to companies listed on the main London Exchange only (i.e. it does not apply to AIM or OFEX listed companies), and it does not carry the force of law. "Comply" or "explain" non compliance is however a requirement of the Listing Rules.

The Code is now a rich source of reference material for non-executive directors. This publication is both a source and guide to that material and written with private sector companies generally, and their non-executive directors, in mind.

It is also intended to be a useful source of reference for non-executive directors of public sector entities, for which many aspects from private sector practice apply but with some important differences. Within the public sector are a host of entities and activities stretching from central to local government. This is a formidable arena but the role and responsibilities of non-executives, and comparisons with their private sector counterparts, can be understood from examining the boards of central government organisations and some "public bodies". The key point to remember is the different objectives of the two governance regimes. Whereas governance in the private sector is ultimately focused upon maximisation of shareholder value, that in central government is focused on delivering the public service objectives (within the policy set by Ministers) of the organisation with good value for money, regularity and propriety.

Contents

The Guide is divided into two sections, each presented under main headings for easy access.

Non-executive directors in the private sector

1. the unitary board context and the important contribution the role of chairman makes to the effectiveness of non-executive directors
2. legal responsibilities and liability
3. the core elements of the role
4. important personal attributes and behaviours required
5. independence and board balance
6. membership of board committees
7. information for non-executive directors
8. induction, professional development and performance evaluation
9. relationship with shareholders
10. recruitment and appointment

Five appendices accompany this section. The first of these is from the Companies Law Review on "General principles by which directors are bound", and three further ones from the Code on "Performance e valuation of non-executive directors", "Pre-appointment due diligence checklist for new board members" and a "Sample letter of non-executive director appointment" for immediate information. The fifth appendix lists additional selected references to the Code.

All material is cross-referenced with the Combined Code where appropriate.

Non-executive directors in the public sector

This section compliments the section for the private sector by focusing on the important differences in the role and its context.

11. central government organisations and non-departmental public bodies (NDPBs or "public bodies")
12. accountability structures
13. boards of central government organisations and NDPBs
14. the role of non-executives on the boards of central government organisations
15. the implications of the Higgs Report
16. board committees
17. audit committees and the Smith Report

A short sixth appendix lists two useful websites."

To register an interest in one or more copies email drjohnmellor@foundationfidirs.com or visit our " contact us " page for further details.

Books

A PRACTICAL GUIDE TO CORPORATE GOVERNANCE by Richard Smerdon

1 chapter by Professor Mellor: "Corporate Governance and Central Government"

Publishers: Sweet & Maxwell [released in April 2004]

GEE CORPORATE GOVERNANCE HANDBOOK

2 chapters by Professor Mellor: "Non-Executive Directors" and "Nomination Committees"

Publishers: Sweet & Maxwell [released in March 2004]

Periodicals

PROFESSIONAL INVESTOR - the official journal of the UK Society of Invetsment Professionals

A lead article by Professor John Mellor – “ A Question of Leadership ” – in the corporate-governance-themed December/January 2004/2005 edition.

“Corporate governance – the purpose of it all – in the midst of all the regulatory brouhaha, it's easy to forget that corporate governance is meant to support enterprise and wealth creation, says John Mellor.”

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PRACTICAL GOVERNANCE

Article by Professor Mellor "Non-Executive Directors in Focus - a regime for professional recognition"

Published in the May edition 2002

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GOVERNANCE

Article by Professor Mellor: "On behalf of the Non-Executive Director"

Published in the July edition, 2001

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