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Ofgem has written an open letter to the chairs of the network operators to request a dialogue on board leadership, governance and transparency.
The regulator said it is also considering changes to board disclosure requirements as part of the RIIO2 price controls.
“The purpose of this letter is to inform you and other interested stakeholders of the authority’s plans to start a dialogue with energy network operators about the arrangement they have in place to ensure effective board leadership, governance and transparency,” wrote Ofgem chair Martin Cave.
“I will be seeking your input and engagement on this topic in the months ahead, including, where possible, direct involvement from your company’s independent non-executive directors.”
He continued: “In recent years, the corporate governance landscape has shifted significantly. There has been greater recognition of the importance of board leadership, stakeholders’ interests, and corporate purpose, values and the culture in driving corporate success, particularly in relation to regulatory focus and compliance.
“I am reaching out to industry at this stage as the authority is keen to understand how network operators and other stakeholders are responding to this agenda.”
Cave noted that in 2014 Ofgem introduce license conditions requiring the appointment of independent director to company boards. He said he wanted to understand the role they have had in “board decision-making and company culture and how this, and other things, ensure the consumer voice is heard loudly and clearly in the board room.”
“Allied to this, as part of RIIO2 we are considering whether current board disclosure requirement could be developed further,” he added. Cave said upcoming proposed changes to regulatory financial performance reporting would seek to improve transparency and accountability, addressing a range of issues including dividend policies, executive remuneration and the resilience and diversity of the workforce.
Cave said he expects to begin informal discussions on the matter later this summer.
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