13th Nov 2019 08:46
(Alliance News) - JD Wetherspoon PLC on Wednesday slammed UK corporate governance codes which it blamed for the "chronic underperformance of many businesses".
The pub operator also reported a 5.3% like-for-like sales rise in the 13 weeks to October 27, with total sales up by 5.6%. Wetherspoon forecasts its full-year results to be in line with expectations.
Chief Executive Tim Martin said: "There can be little doubt that the current system has directly led to the failure or chronic underperformance of many businesses, including banks, supermarkets, and pubs. It has also led to the creation of long and almost unreadable annual reports, full of jargon, cliches and platitudes - which confuse more than they enlighten."
The FTSE 250 firm also accused the corporate governance rules of placing too much power in the hands of non-executive directors, "disenfranchising executives and the workforce".
"'Independent' non-executive directors, who work part time, are limited by the code to nine years' service and stay, on average, for just over four years It is also common practise for there to be only two executive directors, the most senior of whom, the CEO, averages only about five years' - managements and workers are thus absurdly underrepresented," Martin continued.
The company also cited grocery giant Tesco PLC, which Martin said has just two executive directors with nine years of service between them, and 11 non-executives, with a total service of 38 years.
He said: "This sort of corporate structure is mirrored in banks, retailers and pubs - where long-term performance, over recent decades, has usually veered between poor and catastrophic. Adherence to a tick-box culture means, for example, that there are no non-executives on the boards of major UK banks (HSBC Holdings PLC/Royal Bank of Scotland PLC/Barclays PLC/Lloyds Banking Group PLC) who have any personal experience of the last banking crisis at their company - when it is clear that inexperienced boards were a major factor in that crisis."
He added that "non-compliant companies", like Wetherspoon, its peer Fuller, Smith & Turner PLC, and Jet2 Holidays owner Dart Group PLC have benefitted from having more experienced board members.
Martin explained: "In summary, my view is the UK CG system is up the spout - and is itself a threat to listed companies - and therefore to the UK economy. By institutionalising inexperience, the code guarantees the eventual destruction of the culture or 'DNA' of successful companies."
Shares in the company were 0.7% lower at 1,515.00 pence each in London on Wednesday morning.
By Eric Cunha; [email protected]
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