UK regulator the Financial Reporting Council (FRC) has published proposals for a revised UK Corporate Governance Code to reflect the changing business environment and help companies achieve the highest levels of governance.
The revised code focuses on the importance of long-term success and sustainability, addresses issues of public trust in business and aims to ensure the attractiveness of the UK capital market to global investors through Brexit and beyond.
The revised code sets out best practice for corporate boards so they can:
- Establish a company’s purpose, strategy and values, and satisfy themselves that these and their culture are aligned
- Undertake effective engagement with wider stakeholders, to improve trust and achieve mutual benefit, and to have regard to wider society
- Gather views of the workforce
- Ensure appointments to boards and succession plans are based on merit and objective criteria to avoid group think, and promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths
- Be more specific about actions when they encounter significant shareholder opposition on any resolution, including those on executive pay policies and awards
- Give remuneration committees broader responsibility and discretion for overseeing how remuneration and workforce policies align with strategic objectives.
Sir Win Bischoff, chairman of the FRC, says in a statement promoting the new code: ‘The UK is globally renowned for its corporate governance framework, which is underpinned by the UK Corporate Governance Code. At this critical time, and as the country approaches Brexit, a revised code will be essential to restoring trust in business, attracting investment and ensuring the long-term success of companies for members and wider society.
‘We have engaged with many stakeholders and incorporated suggestions from the government’s Green Paper on Corporate Governance Reforms to produce a code that is shorter and sharper and fit for purpose. A principle promoting the importance of the intrinsic value of corporate culture is a new addition to the code. Building trust in business has to start in the organization, and forming a healthy corporate culture is integral to the credibility of a company.
‘Engaging with and contributing to wider society must not been seen as a tick-the-box exercise but as imperative to building confidence among stakeholders and, in turn, the long-term success of a company.’
