On 28 September 2012, the Financial Reporting Council (‘FRC’) announced limited changes to the UK Corporate Governance Code and the Stewardship Code. The changes, which were effective 1 October 2012, seek to increase accountability and engagement through the investment chain.

The UK Corporate Governance Code

Changes to the UK Corporate Governance Code include the following:

  • FTSE 350 companies are to put the external audit contract out to tender at least every ten years;1
  • audit committees are to disclose to shareholders how they have carried out their responsibilities;
  • boards are to confirm that the annual report and accounts taken as a whole are fair, balanced and understandable;
  • companies are to explain their policies on boardroom diversity and report on progress in this area; and
  • companies are to provide fuller explanations to shareholders when they choose not to follow any provision of the Code.

The Stewardship Code

Changes to the Stewardship Code include the following:

  • investors are to explain more clearly how they manage conflicts of interest, the circumstances in which they will take part in collective engagement, and the use they make of proxy voting agencies;
  • asset managers are encouraged to have the processes that support their stewardship activities independently verified in order to provide greater assurance to their clients; and
  • the respective stewardship responsibilities of asset managers and asset owners have been clarified.

Guidance on Audit Committees

The FRC has published an up-dated edition of its Guidance on Audit Committees to reflect the changes to the UK Corporate Governance Code, and included transitional arrangements regarding the introduction of the ten year tendering process on its website.

Directors’ remuneration

The FRC will consult on whether it will need to revise the UK Corporate Governance Code again once the Government’s legislation dealing with changes to the directors’ remuneration regime has been finalised. Any necessary changes will be made in the next edition of the Code.

FRC Press Release PN010, 28 September 2012, available at:


UK Corporate Governance Code: September 2012 edition available at:


Stewardship Code: September 2012 edition available at:


Guidance on Audit Committees: September 2012 edition available at: