Issue: Governance – Independence of the Auditor
WHEB’s definition of auditor independence is aligned with that of the European Union which states that audit contracts should be retendered after ten years for publicly listed companies. The original audit firm can be reappointed for a second term of ten years, but after this the audit firm needs to be changed to maintain independence.
To encourage the board to adopt a stricter interpretation of auditor independence and avoid compromising the quality of the audit.
Scope and process:
In contrast to the EU, US regulations do not require publicly traded companies to change the audit firm conducting the audit. Instead, they require the lead auditor within the firm to be changed at least every five years. Consequently, most US companies that we engage on this issue point out that their approach is consistent with US regulation.
In several cases, companies have not responded to our engagement letters at all. One of these companies is Danaher Corporation. We have written to the Board of Danaher every year since 2013 on this and multiple other issues including CEO remuneration, Director ‘overboarding’, Director independence and supporting shareholder resolutions on political donations and sustainability reporting.
Despite many years of seeking to engage the Board of Danaher Corporation on multiple issues, we have had only one response. This came in 2018 thanking us for a request that we submitted to them asking for data on the positive impact of their products.