UK: 'comply or explain' should be strengthened says FRC chief executive

The Financial Reporting Council held its annual open meeting yesterday. Paul Boyle, the FRC's chief executive, delivered a speech reflecting on the work of the FRC and current issues. Mr Boyle spent some time arguing against the use of accounting as a public policy tool to reduce pro-cyclicality. Mr Boyle also stated that the FRC would soon publish a progress report regarding its review of the Combined Code and, in this regard, observed:

The UK system of corporate governance is well-respected but our sense is that application of the “comply or explain” approach which underpins it needs to be strengthened. The continued viability of the “comply or explain” approach depends on the willingness of a sufficient number of institutional investors to play an active role in monitoring the corporate governance practices of the companies in which they invest".