Concentrated Power at Top of Businesses Remains a Red Flag, Financial Times Reports

The issue of concentrated power at the top of businesses remains a significant concern, according to a recent article in the Financial Times. The article highlights the ongoing debate surrounding the separation of the roles of chair and chief executive in corporate governance.

The Financial Times reports that proxy advisers are calling on investors to replace the chairs of major companies such as BASF and Munich Re, who previously served as chief executives of their respective groups. This move underscores the growing sentiment that the corporatist spell, which allows for the concentration of power in a single individual, must soon break.

The article cites the example of FTSE 250 housebuilder Vistry, which has announced that Greg Fitzgerald will combine the roles of executive chair and CEO after its May annual meeting. This decision goes against the UK corporate governance code, which recommends separating the two positions. However, the company's 15% rise in share price suggests that investors may not view this as a significant concern.

The debate surrounding the separation of chair and chief executive roles is not clear-cut. While some argue that having a powerful boss can lead to decisive leadership, others point out the risks of hubris and the potential for abuse of power.

Why this matters: The concentration of power at the top of businesses has far-reaching implications for corporate governance, accountability, and the overall health of the economy. As investors and regulators grapple with this issue, the decisions made by major companies will set important precedents for the future of corporate leadership.

The Financial Times article serves as a reminder that the issue of concentrated power in corporate leadership remains a pressing concern. As the debate continues, it is crucial for investors, regulators, and the public to closely monitor developments in this area and advocate for strong corporate governance practices that prioritize transparency, accountability, and the separation of powers.

Key Takeaways

• Proxy advisers call to replace chairs who were former CEOs
• FTSE 250 firm Vistry combines chair and CEO roles, against UK code
• Debate on separating chair and CEO roles has no clear consensus
• Concentrated power at top raises concerns for corporate governance
• Investors, regulators must monitor developments in corporate leadership