During the course of 2009 the Financial Reporting Council (FRC) has carried out a review of the impact and implementation of the Combined Code. The FRC has now published the results of that review in a document entitled 2009 Review of the Combined Code: Final Report.
As a result of the review the FRC is consulting on a number of changes to the Code. The main proposals are:
- To enhance accountability to shareholders, the FRC proposes either the annual re-election of the chairman or of the whole board.
- To ensure the board is well balanced and challenging, new principles are put forward on the leadership of the chairman, the roles, skills and independence of the non-executive directors and their level of time commitment.
- To enhance the board’s performance and awareness of its strengths and weaknesses, board evaluation reviews should be externally facilitated at least every three years and the chairman should hold regular development reviews with each director.
- To improve risk management, new principles are proposed on the board’s responsibility for and handling of risk.
- Proposals are also made to emphasise that performance-related pay should be aligned to the long-term interests of the company and its policy on risk.
The Code, which was formerly known as the Combined Code, will be renamed The UK Corporate Governance Code to avoid confusion among overseas investors.
The deadline for comments on the consultation is 5 March 2010. Subject to the outcome of the consultation, and the necessary changes to the Listing Rules, the FRC intends that the revised Code should apply to all listed companies with a Premium Listing for financial years beginning on or after 29 June 2010.
In response to the Government’s request that the FRC take responsibility for a stewardship code for institutional investors as recommended by Sir David Walker, the FRC will carry out a separate consultation designed to ensure that it can be operated effectively.
View 2009 Review of the Combined Code: Final Report, 1 December 2009
View Consultation on the revised UK Corporate Governance Code, 1 December 2009