While QBE CEO Frank O’Halloran’s move to the board next year has not raised concerns among investors, the insurer does not seem to be following the Australian Securities Exchange’s (ASX) recommendation in making the appointment.

Mr O’Halloran will take a six-month break from QBE when he steps down as CEO in August before rejoining as a non-executive director next February.

While it’s unusual for a CEO to join the board of the same company they have just left, there is nothing illegal with Mr O’Halloran’s move to the board. Nor does it set a precedent; former QBE chairman John Cloney was Mr O’Halloran’s predecessor as CEO.

When determining the independence of a director, the ASX’s Corporate Governance Principles recommend a person should not have been employed by the company in an executive role for at least three years.

“When determining the independent status of a director the board should consider whether the director is employed, or has previously been employed in an executive capacity by the company or another group member, and there has not been a period of at least three years between ceasing such employment and serving on the board,” the ASX says.

It also recommends a former CEO should not become chairman of the same company.

But the ASX principles do require directors to have an understanding of the culture and values of the company.

Australian Shareholders’ Association CEO Vas Kolesnikoff told insuranceNEWS.com.au Mr O’Halloran’s knowledge of the insurance industry is a “bonus” to QBE and his move to the board is seen as a positive.

“The issue will be balance and the independence of the new CEO [John Neal] to pursue appropriate strategies.

“Mr O’Halloran is not chairman and will not be managing the board process,” Mr Kolesnikoff said.

“QBE has always had an ongoing relationship with previous CEOs and this is no different from what has happened in the past.”