Revised Corporate Governance Code to build trust in business

The Financial Reporting Council (FRC) has published proposals for a revised UK Corporate Governance Code to help UK companies achieve higher levels of governance.

The FRC says the code is shorter and sharper and builds on the findings from the FRC’s Culture Report published in 2016.

The revised Code focuses on the importance of long-term success and sustainability, addresses issues of public trust in business and aims to ensure the attractiveness of the UK capital market to global investors through Brexit and beyond.

The revised Code sets out good practice so that the boards of companies can, for instance undertake effective engagement with wider stakeholders, to improve trust and achieve mutual benefit, and to have regard to wider society. 

Meritocracy

It also calls for appointments to boards and succession plans to be based on merit and objective criteria to avoid group think, and promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.

Remuneration committees should take broader responsibility for overseeing how remuneration and workforce policies align with strategic objectives.

Commenting on the Code, Sir Win Bischoff, Chairman of the FRC, said: “The UK is globally renowned for its corporate governance framework, which is underpinned by the UK Corporate Governance Code. At this critical time and as the country approaches Brexit, a revised Code will be essential to restoring trust in business, attracting investment and ensuring the long-term success of companies for members and wider society.” 

A healthy culture

He adds:  Building trust in business has to start in the organisation and forming a healthy corporate culture is integral to the credibility of a company. Engaging with and contributing to wider society must not been seen as a tick-box exercise but imperative to building confidence among stakeholders and in turn the long-term success of a company.”

Business Minister Margot James said: “Firms that are alive to the concerns of their workers and shareholders see the benefits on their bottom line and the Financial Reporting Council’s proposals will ensure our largest companies benefit more from the experience of their workforce, suppliers and customers.”