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Myners proposes voluntary code for mutuals

Paul Myners’ Government-sponsored review of life office management is calling for non-executives to take a greater role in ensuring good governance at mutuals.

Myners also proposes that mutuals should adhere to an adapted version of the combined code on corporate governance and the Financial Reporting Council’s requirements for listed companies and that members should be involved more to improve transparency.

He is calling for the measures to be introduced on a voluntary “comply or explain” basis to avoid costly legislation which could eat into the prospective benefits.

He says a voluntary basis would also recognise that many life offices have improved their corporate governance practices since the Penrose report into Equitable Life criticised non-executives’ lack of actuarial awareness.

The Association of Mutual Insurers and the Association of Friendly Societies are set to consult their members on Myners’ draft version of the combined code with a view to adoption at the start of 2005-06. The associations will then collect and publish information annually on members’ adherence to the code.

The FSA will review the situation in 2008 to see if the voluntary code has been adopted successfully.

Non-executive board members will have greater input at the board level and will meet with FSA representatives independently of executive board members to discuss governance issues.

Myners calls for members’ consent to be sought when making major transactions and for member working panels to be set up to encourage dialogue between members and management. The AMI and AFS will consult on the best way to implement this.

Myners also wants directors’ remuneration packages to be made available publicly, as with listed companies.

Royal London group chief executive Mike Yardley says: “While the changes would inevitably cause some increase in operating costs for mutuals overall, it will be a price worth paying since the result will be to validate the important role that mutuals play in the financial services sector.”

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