The Financial Reporting Council (FRC) has announced plans to launch a fundamental review of the UK Corporate Governance Code later this year.
The focus of the review
The review will consider the appropriate balance between the UK Corporate Governance Code's principles, provisions and guidance. The FRC is seeking to preserve and build on the recognised strengths of UK governance such as the unitary board, strong shareholder rights, the role of stewardship and the "comply or explain" approach but will also consider the growing demands on the corporate governance framework.
The review will take account of the work done by the FRC on corporate culture and succession planning, and the issues raised in the Government’s Green Paper on Corporate Governance and the BEIS Select Committee inquiry. In its response to the Government's Green Paper, the FRC will consider:
- The importance of helping boards take better account of stakeholder views;
- 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.
The FRC will launch a consultation on its proposals later in 2017 and will take into account responses to the Government's Green Paper on Corporate Governance (please see our previous article for more).
The FRC intends to undertake a full consultation and will seek input from a wide range of stakeholders, including its recently established Stakeholder Advisory Panel which includes representatives from a variety of sectors.
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