Quindell PLC Corporate Governance Under Fire

quindellQuindell (LSE: QPP), the provider of outsourcing services to insurance companies like Aviva and Direct Line, has certainly had its share of problems of late.

After a short-selling attack in May, the company’s attempt to move itself away from the Alternative Investment Market (AIM) and obtain a full market listing stumbled at the last hurdle — Quindell had been growing so fast that it could not show the stable three years required by the London Stock Exchange (LSE).

That doesn’t imply anything bad about the company — but it does suggest the board was perhaps a little naive and hadn’t done its homework properly. As a result, the share price took a bit of a tumble.

Board changes

Today, the day of Quindell’s AGM, we heard that founder Rob Terry has stepped down from the chief executive role, though he will remain as chairman. The company has hired Robert Fielding as the new boss.

The separation of the two roles could be the first step on a path towards a corporate governance regime that is more in keeping with an eventual second attempt at a full LSE listing. Nobody is suggesting there’s anything wrong with the way the company is run, but a full market listing does bring more stringent requirements.

In fact, in its Corporate Governance guide, the LSE says that a company seeking a main market listing “is likely to need to make changes to its corporate governance structure — including the composition of the board and its committees and internal controls“. The purpose of the stricter regulations is to “help balance the relationship between directors, as managers of the company, and shareholders, as its owners” — and that can only be a good thing.

What they’ll be talking about

Talk of corporate governance was expected in some quarters ahead of the AGM. Hedge fund manger Davide Serra, who owns 2% of Quindell’s stock, told the Sunday Telegraph that we could be seeing a couple of independent non-executive directors (NEDs) being recruited to the board in the fairly near future. While not criticizing Quindell’s current setup, Mr Serra said that “if you want to play in the big league you need improvement“.

That does appear to fit in with Quindell’s plans, as the company has said it intends to appoint new NEDs, and will again seek admission to the main LSE market in due course.

So what do we think?

It’s a positive move

Well, I reckon Quindell investors should take cheer from the latest developments. Corporate governance was not cited as a reason for the failed admission application, so there was nothing urgent. But moves to ensure that standards are at the highest level bodes well for the future. The shares picked up 2% to 18p, so the punters appear satisfied.

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Alan does not own any shares mentioned in this article.