Schroders defends governance as CEO becomes chairman

* Adjusted pretax profit 609.7 mln pounds, up 8 pct

* Revenues, profits, assets at record; shares rise

* Michael Dobson to step down as CEO, become chairman (Adds detail, background, investor quote, analyst quote)

By Simon Jessop and Sinead Cruise

LONDON, March 3 (Reuters) - Money manager Schroders was forced to defend its corporate governance after announcing Chief Executive Michael Dobson would become chairman having led the company since 2001.

Britain's biggest listed asset manager, which has faced criticism for its bumper boardroom payouts, said Dobson would be replaced by Peter Harrison in a reshuffle of top management.

Dobson will become non-executive chairman, succeeding Andrew Beeson who will retire in April.

Schroders (LSE: SDR.L - news) said it had written to its shareholders to explain the appointments, mindful of the UK Corporate Governance Code, which states "a chief executive should not go on to be chairman of the same company".

Schroders, which reported forecast-beating annual results on Thursday, said the changes were in the best interests of the company and its investors.

Schroders' top shareholder remains the family whose name the firm has borne since being founded more than 200 years ago.

"They're going to lengths to justify it on the basis that they know it doesn't represent, strictly speaking, corporate governance best-practice," said Shore Capital analyst Paul McGinnis said.

"It (Other OTC: ITGL - news) 's already within the crosshairs of some of the corporate governance investors, so doing something like this will only increase the heat," he added, referring to long-standing concerns around pay.

BEST PRACTICE

The Corporate Governance Code sets out guidelines to ensure companies are well led. Listed companies are required to report how they have applied the main principles, although the code is not legally binding.

As chairman, Dobson will be expected to oversee the actions of the new chief executive and, if necessary, step in to ensure the interests of shareholders are protected.

Dobson said he did not consider his move a problem, despite Schroders' role as a guardian of corporate best practice on behalf of its clients, who own the shares and bonds of scores of companies across Britain and beyond.

"Where this has happened in other companies, we've supported it on occasion, we've abstained on occasion, and we may have voted against on occasion, so we've taken a view which is very much tailored to the individual situation."

The firm beat consensus profit expectations on the back of strong institutional inflows.

Shares (Berlin: DI6.BE - news) in Schroders were up 1.6 percent at 2,762 pence by 1110 GMT, compared with a flat FTSE 100.

While the firm had seen some retail outflows in recent months, strong demand from pension funds and other large investors cushioned the blow.

Profit before tax and exceptional items, adjusted to exclude costs associated with its 2013 purchase of wealth manager Cazenove Capital, rose 7.9 percent to 609.7 million pounds ($858.40 million) year on year, against a company supplied consensus forecast for 601.1 million pounds.

The firm is to pay a total dividend of 87 pence a share, against consensus expectations for 86.1 pence a share. ($1 = 0.7103 pounds)

(Editing by Keith Weir)