New Corporate Governance Code

The ShareSoc blog provides news and informal commentary from directors, members and other contributors. Entries reflect the personal views of the authors, which do not necessarily reflect ShareSoc’s formal position. Contributors may hold shares in the companies mentioned. Nothing in this blog should be viewed as financial advice. You may submit comments on blog posts, but ShareSoc reserves the right to remove or edit inappropriate or defamatory submissions.

The Financial Reporting Council (FRC) have published a new UK Corporate Governance Code – a draft that is subject to public consultation. The revised Code sets out good practice so that the boards of companies 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; and
  • Give remuneration committees broader responsibility and discretion for overseeing how remuneration and workforce policies align with strategic objectives.

Perhaps the most controversial change will be the requirement to consult with the workforce and suggests three ways this might be done (worker directors, a workforce advisory panel or a designated non-exec director), although it does not rule out other methods. This writer suggests this is a positive step but some shareholders might not agree.

It also suggests better engagement with shareholders although as usual there is an emphasis on a few major shareholders rather than the wider shareholder community.

The UK Corporate Governance Code has helped to improve the operation of UK company boards so it is important that any changes made are positive. On a quick review most of the changes seem to be improvements, but the devil is in the detail on such documents. More information including how to respond to the consultation is present here: https://www.frc.org.uk/news/december-2017-(1)/a-sharper-uk-corporate-governance-code-to-achieve

I may comment further at a later date.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.