A plan by Smurfit Kappa to extend the board term of chairman Irial Finan by up to four years beyond what is considered good practice, under a code for UK and Irish listed companies, has secured the backing of two influential advisers to major investors.
Under the UK Corporate Governance Code, which applies to companies on the main London and Irish exchanges, Mr Finan, a former top Coca-Cola executive, should have stepped down from the Smurfit Kappa board in February last year, after nine years. However, the paper packaging giant said in its recent annual report that it plans to extend the chairman’s term on the board by as many as three more years to “ensure an orderly succession and transition of the chair”.
Smurfit Kappa said its board concluded “it would not be in the best interests of the company or shareholders” for Mr Finan, who has been chairman for almost three years, to depart from the board “given the exceptional leadership, governance and direction from the chair and the level of board refreshment in recent years”. Half of the non-executive directors have been appointed within the past five years.
Glass Lewis, a leading proxy advisory company that makes recommendations on how shareholders should vote on agm resolutions, initially called in a report issued at the start of this month for Smurfit Kappa shareholders to vote against the re-election of Mr Finan at the company’s meeting on April 29th.
However, it has since reversed its view and is now urging investors to back the chairman, after taking into account Smurfit Kappa’s disclosure of its reasons, which adhered to the governance code’s “comply or explain” principles.
“In this case, upon further review of the company’s disclosure, we acknowledge and welcome the provision of a definitive timeline for succession over the next three years, and recognise the mitigating factors cited by the company for such an extension, particularly given the recent appointment of the chair to the role,” said Glass Lewis.
“Having reviewed the available disclosure, we do not see any cause for concern in terms of the board’s process in proposing the extension of the chair’s term of appointment.”
Institutional Shareholder Services (ISS), another proxy advisory firm, said that Smurfit Kappa’s rationale for Mr Finan’s term extension was “acceptable” and is not calling for any voting action against the chairman “at this time”.
“The matter will be kept under review,” it added.
Smurfit Kappa has committed that its board will identify a suitable candidate to succeed Mr Finan by the end of the extended period, up until February 2025.
