The Financial Reporting Council has announced plans for a ‘fundamental review’ of the UK Corporate Governance Code.
The review will take into account the work done by the FRC on corporate culture and succession planning, and the issues raised in the government’s green paper and the Business, Energy and Industrial Strategy Committee (BEIS) inquiry. The FRS said it will build on the code’s globally recognised strengths developed over the past 25 years while considering the appropriate balance between its principles and provisions and the growing demands on the corporate governance framework.
As part of the review process the FRS will gain input from a wide range of stakeholders, including its recently established stakeholder advisory panel of high profile representatives from a wide variety of sectors.
Furthermore, in its response to the government’s green paper on corporate governance reform the FRC will highlight the importance of helping boards take better account of stakeholder views, linking executive remuneration with performance, and extending the FRC’s enforcement powers to ensure that disciplinary action can be taken against all directors where there have been financial reporting breaches.
Speaking at the launch of the Institute of Chartered Secretaries and Administrators’ work on The Future of Governance, FRC chairman Sir Win Bischoff said: “The Prime Minister has a vision of an economy that, in her words, ‘works for everyone’. This needs UK businesses to thrive so that all stakeholders including workers, customers, suppliers and society itself benefit through jobs growth and prosperity.
With all this in mind, we will conduct a review of the current UK Corporate Governance Code. This will consider the appropriate balance between the code’s principles and provisions. In pursuing any changes, the current strengths of UK governance: the unitary board, strong shareholder rights, the role of stewardship and the ‘comply or explain’ approach, must be preserved. We must not throw out the baby with the bathwater. Any changes to the regulatory frameworks and to the code will be done carefully and through full consultation with a wide range of stakeholders.”
The FRC will commence a consultation on its proposals later in 2017, based on the outcome of the review and the government’s response to its green paper.