FTSE SmallCap urban regeneration and land development specialist MJ Gleeson Group holds its AGM on 6 December and shareholders may hold concerns with the level of independence on its board.

MJ Gleeson’s board consists of CEO & Managing Director Jolyon Harrison, CFO & Company Secretary Stefan Allanson, Chairman Dermot Gleeson, and non-executives James Ancell, Colin Dearlove and Chris Mills. All three non-executives have served on the board for more than nine years – Mills is also connected to major shareholder Harwood Capital. Chairman Gleeson has previously served in an executive capacity and has also served on the board since 1975. Therefore, on a strict application of the UK Corporate Governance Code’s independence criteria, there are no demonstrably independent directors on the board. In addition, shareholders will note there are no women directors.

The board does, however, consider Ancell and Dearlove to retain independence despite their tenure. As such, the audit and remuneration committees, which the Code recommends be comprised solely of independent directors, is comprised only of Ancell and Dearlove.

The new Code states the chair should not remain in post beyond nine years from the date of their first appointment to the board and also removes the small company exemption on board independence - the previous edition provided that smaller companies should have at least two independent directors rather than at least half the board, excluding the chair, be independent. In the annual report, the board states it has evaluated the impact of the revisions to the Code and recognises that it will be required to make changes, particularly with respect to board composition and the roles of individual directors, and the nomination committee is considering how best to progress this process.

The new Code applies to accounting periods beginning on or after 1 January 2019 and will first apply to MJ Gleeson’s financial year commencing 1 July 2019. The board did not make any changes to its composition during the year although it has outlined an intention to take steps over the coming year to address the Code’s requirements. Institutional investors may initially be more lenient when first assessing compliance against the new Code, although some may expect companies to adopt certain provisions early.

Governance Issues at AGMs