Thursday, 16 February 2017

UK: FRC plans for a 'fundamental' review of the UK's Corporate Governance Code

The Financial Reporting Council has today formally announced (having already indicated what was to come) its plans for a 'fundamental review' of the UK Corporate Governance Code: see here. The FRC has also provided information about its newly formed Stakeholder Advisory Panel. The Panel will have a role in guiding the FRC's review of the Code, although it's not yet clear what this will precisely entail (for example, will the Panel have primary responsibility for determining the terms of reference of the FRC's review?).

It is, perhaps, surprising that nothing is said about the Stewardship Code in the FRC's announcement. Can a fundamental review of the UK's Governance Code be complete without also considering an important aspect of its enforcement through 'comply or explain' and what is expected of investors? These matters were mentioned in a speech yesterday by the FRC's chairman, Sir Winfried Bischoff, but it appears that they are not to be considered. To quote Sir Winfried: "In pursuing any changes [to the Code], 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 believe".

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