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On 12 July 2022, Softcat plc (Softcat) its board succession plan for 2023, which announced that its chief executive, Graeme Watt, is to succeed Martin Hellawell as the company’s board chair. The appointment of a former CEO to the position of chair is generally frowned upon in the UK corporate landscape, with of the UK Corporate Governance Code (UKCG Code) stating that:

‘a chief executive should not become chair of the same company. If, exceptionally, this is proposed by the board, major shareholders should be consulted ahead of appointment. The board should set out its reasons to all shareholders at the time of the appointment and also publish these on the company website.’

Although it should be noted that the UKCG Code operates on a ‘comply or explain’ basis, allowing companies to deviate from its precepts if they consider that a different approach is more appropriate to their circumstances and disclose why they have done so. For more information on the comply or explain principle, see Practice Notes: and . In its disclosed plan, Softcat sets out the following reasons for Watt’s future position:

‘This move has been carefully considered by the Board, which acknowledges that the appointment of the CEO into the role of the Chair is not in line with the recommendations of the UK Corporate Governance Code. However, the Board was unanimous that Graeme's deep knowledge of the business, Softcat's culture and its markets made him the ideal candidate to support the interests of all our stakeholders.’

This is not the first time that Softcat has parachuted a former CEO into the position of chair. Hellawell, its incumbent chair, previously held the positions of chief executive and managing director between 2006 and 2018, which, according to the company, him lead Softcat ‘through a highly successful IPO and its first two years as a PLC’. However, Hellawell’s side shuffle into the position of chair on 1 April 2018 did not go completely unnoticed, with 16.2% of votes against his re-election at the company’s AGM on 12 June 2018. Nonetheless, dissent was lower in the years following his appointment (: 4.2%; : 1.7%; : 7.7%).

Although Softcat is yet to disclose its Notice of AGM for 2022, it is likely to take place in the last quarter of the year. It will be interesting to see if Watt sees any investor opposition to his re-election in response to the disclosure of his future move.

Softcat is also not the only FTSE 350 company to have diverged the precepts of the UKCG Code in this way. Back in early 2014, Experian plc (Experian) its former CEO, Don Robert, to the position of board chair, noting the following in its announcement:

‘The Nomination & Corporate Governance Committee, having considered external and internal candidates and having undertaken a rigorous process, came to the conclusion that Don Robert was the outstanding candidate for this position and recommended his appointment to the Board.  Above all, the Board believes that the Company will derive substantial benefit from ensuring the continuity of the senior leadership team into the medium term, and maximise the likelihood of preserving the Company's unique and successful culture. The appointment also provides the additional significant benefit of strong existing knowledge of Experian, a key consideration given the highly complex and unique nature of the business. The Board has, as a result, unanimously approved his appointment.’

Following Robert’s move, 11.1% of votes were against his re-election at Experian’s AGM on 16 July 2014, the highest level of dissent received by any director at the company. In the aftermath of the vote, Experian a press release on its website stating that it was ‘pleased that all resolutions at today’s AGM were passed including the resolution to re-elect Don Robert, Chairman, as a Director of Experian, with nearly 90% of votes cast in favour’.

For more information on corporate governance concerns surrounding the move of a CEO to the position of board chair, see the ‘Provision 9’ section of Practice Note: .

LondonMetric Property plc (LondonMetric) has also recently come under fire for chair-related governance shortcomings. At its AGM on 13 July 2022, 20.1% of votes were against the re-election of the company’s chair, Patrick Vaughan. According to LondonMetric’s website, Vaughan non-executive chair on 1 October 2014, meaning that he has held his position for more than the nine years recommended by the UKCG Code:

‘The chair should not remain in post beyond nine years from the date of their first appointment to the board. To facilitate effective succession planning and the development of a diverse board, this period can be extended for a limited time, particularly in those cases where the chair was an existing non-executive director on appointment. A clear explanation should be provided.’

However, it should also be noted that the latest version of the Financial Reporting Council’s guidance on board effectiveness, published to support the 2018 iteration of the UKCG Code, that:

‘There may be reasons for justifying a limited extension to the term of the chair beyond nine years if prior to being appointed chair, they have been a board member for a significant amount of time, and the appointment supports the company’s succession plan and diversity policy.’

In its disclosed AGM results, LondonMetric noted the following:

‘In relation to Provision 19 of the Corporate Governance Code relating to the tenure of the Chair, the Board does not believe that Patrick's independence and objectivity is compromised by the length of his service, and values his property expertise and sound judgement. However, the search for a successor is underway.’

As the company has announced that it is looking Vaughan’s successor, it will be interesting to see if he is still there at LondonMetric’s next AGM, and, if so, how many shareholder votes will be cast against his re-election.

For more information on chair and director tenure, see the ‘Provision 19’ section of Practice Note: .