Business chiefs 'can run their own affairs'

The CBI: "Best practice does not always mean the only practice"

The UK's top business association has defended companies' rights to run their own affairs, after a group representing many of the UK's largest investors warned against executives taking on too many senior roles.

The Confederation of British Industry has said that "best practice does not always mean the only practice" after an insurers' lobby group voiced concerns over firms electing one person to both chairman and chief executive posts.

The Association of British Insurers, whose member organisations hold about £1,000bn in assets, has, in letters to some of the UK's leading companies, urged companies to ensure they do not concentrate powers unduly in the hands of one executive.

But the CBI believes "it is up to individual boards if they want to propose [joint appointments] to their shareholders", a statement on Thursday said.

Corporate governance guidelines drawn up following a series of reviews were "obviously" having an affect because fewer firms were giving both top jobs to one person, the CBI said.

'Exceptional circumstances'

The confederation's support for existing rules was largely backed by the Quoted Companies' Alliance, which represents the 250 companies behind the FTSE 100 group of UK corporate giants.

There is a need for having slightly separate viewpoints

John Pierce, Quoted Companies' Alliance

But the alliance said, nonetheless, that it should only be necessary "in exceptional circumstances" for firms to combine chief executive and chairman.

"There is a need for having slightly separate viewpoints," QCA chief executive John Pierce told BBC News Online.

"You need a chairman to look at things from a strategic point of view, to consider a company's position in the marketplace.

"And you need a chief executive to run the business, look after day-to-day affairs."

Pressure from investors

The ABI said it had launched its campaign in response to pressure from members, which include life insurance and pension giants such as CGNU and Prudential.

"The issue is something our members are increasingly concerned about," ABI spokeswoman Suzanne Moore told BBC News Online.

While guidelines leave firms free to combine chief executive and chairman roles if the decision is explained to shareholders, the reasons given are "often not satisfactory", Ms Moore said.

"A separate chairman allows for useful debate at the top of the company," she said.

'Better kept separate'

The Hampel Committee, which undertook the latest corporate governance review, recommended that a combined chief executive/chairman represents "a considerable concentration of power".

Ed Wallis; chairman and chief executive of Powergen

The two roles are "better kept separate" where possible, the committee said in its 1997 report to the government.

But the report added: "A number of companies have combined the two roles successfully, either permanently or for a time.

"We do not therefore think that the separation of the two roles should be made a firm rule."

Companies run by a joint chairman and chief executive include retailer Marks & Spencer, electricity generator Powergen, and the Alliance & Leicester bank.

Greg Hutchings, who for several years occupied both roles at industrial conglomerate Tomkins, recently resigned over allegations of financial impropriety and corporate excess.