03 December 2018

Audit&Risk: AIM companies should woo investors with improved corporate governance

Companies listed on the Alternative Investment Market (AIM) have made significant improvements in corporate governance disclosure since a new rule change came into effect in September 2018, but there is still room for improvement, according to accountants UHY Hacker Young and the QCA.

Their Corporate Governance Behaviour Review has revealed that:

• Before the change to AIM Rule 26, only 24 per cent of AIM-listed companies explained how their board ensured that the company’s ethical standards are recognised. This rose to 80 per cent after the change.
• Previously, only ten per cent referred in the chair’s corporate governance statement to how the company’s culture is consistent with its strategy and business model. This rose to 62 per cent after the rule change.

However, the research also revealed that AIM companies are still falling short in other new corporate governance requirements: 

• 42 per cent do not identify their independent directors.
• 88 per cent do not provide a description of how board performance is measured; this includes details of actual performance metrics and how often performance reviews take place.
• 34 per cent do not detail director compensation and any benefits awarded each year.
• 30 per cent do not describe the roles and responsibilities of the chair, CEO and board members

The new rule changes, which came into force on 28 September 2018, require AIM-listed companies to adopt a recognised corporate governance code, for example the QCA Corporate Governance Code. Companies must either disclose how they have complied with each principle under their adopted code or explain why they have not.
“Despite improvements in recent years, and as a result of the new AIM rule, the research has exposed that AIM companies still have a lot of work to do in bringing corporate governance up to required levels,” said Martin Jones, partner at UHY Hacker Young. 

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