In Ireland, the corporate governance of business organisations is derived from a combination of corporate law,2 statutory regulations and codes (for the most part non-binding). In addition, for privately owned corporations, while the governance architecture is explicitly dealt with in the constitutional documents and by-laws (known as the constitution or articles of association), it is also often addressed as a matter of contract between the shareholders in a shareholders' agreement.
For the purposes of this chapter, we will focus on corporate governance in public or listed companies.
i Corporate governance requirements for listed companies
In Ireland, companies listed on the principal Irish securities market, Euronext Dublin, are required to comply with both the UK Corporate Governance Code (Corporate Governance Code) and the Irish Corporate Governance Annex.
The terms of the recently updated Corporate Governance Code3 are dealt with elsewhere in this publication,4 and it is not proposed that those terms be restated here. An important basis or feature of the Corporate Governance Code is the comply or explain approach to compliance. Under the Irish Stock Exchange Listing Rules (Listing Rules), companies listed on Euronext Dublin are expected to comply with the Corporate Governance Code or set out an explanation for any deviation from its provisions in their annual report to shareholders.
The Irish Corporate Governance Annex asks for meaningful, evidence-based descriptions in the annual report of how the Code is applied rather than 'recycling' descriptions that replicate the wording of the Code.
The Irish Annex identifies the following key recommendations for inclusion in the annual report:
- an explanation as to why the number of non-executive directors is regarded as sufficient;
- a description of the skills, expertise and experience of each director – including government appointees;
- the process followed in selecting and appointing new directors;
- the methodology in the annual evaluations of the directors individually and collectively;
- the factors taken into account when determining a director's independence;
- a description of the work carried out by the audit committee generally, and in relation to risk oversight more specifically; and
- a description of the remuneration policy, how performance elements are deferred and any clawback arrangements.
Furthermore, companies listed on the smaller Irish securities market, Euronext Growth, are also encouraged to adopt a corporate governance code on admission to that market, and are required to publish details of the corporate governance code it has chosen to apply and how it complies with that code, or a statement that it has not adopted any code if that is the case. In practice, a number of them adhere to the Principles of Corporate Governance issued by the UK Quoted Companies Alliance.
Central Bank of Ireland
PO Box 559
Phone: +353 (0)1 224 6000