The Financial Reporting Council (FRC) is to undertake a fundamental review of the UK Corporate Governance Code. The review will take account of work done by the FRC on corporate culture and succession planning. It will also take into account the issues raised in a recent Government Green Paper which proposes 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.
Sir Win Bischoff, chairman of the FRC, comments: “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 this year, based on the outcome of the review and the response to the Green Paper.