The FRC announces plans for a fundamental review of the UK Corporate Governance Code
Twelve months is a long time in governance. In its 2016 Annual Report, the FRC stated that, after much recent activity (described by one commentator as ‘a period of churn in codes and standards’), it did not intend to make substantial revisions to the UK Corporate Governance Code for the next three years. Then came Brexit and a new Government, and momentum shifted once again towards reform. Speaking about cracking down on bad businesses in November, Theresa May said “the behaviour of a few has damaged the reputation of the many. And fair or not, it is clear that something has to change.” And it will require some careful thought by comms teams.
Last week the FRC announced plans for a fundamental review of the Code, taking account of its work on corporate culture, as well as issues raised by the Government’s Green Paper published in late 2016. The FRC recognises that a year ago the political mood was very much for deregulation but now, in the words of ICSA policy adviser Chris Hodge, the perceived purpose of governance has gone from being merely ‘better oversight’ to ‘saving capitalism’.
It is not possible to predict the outcome of the FRC review. Areas of focus are likely to include those highlighted by the FRC in its response to the Green Paper – namely, the importance of helping boards take better account of stakeholder views, linking executive remuneration with performance and extending the FRC’s enforcement powers. Whatever the outcome, FRC Chairman Sir Winfried Bischoff has assured that the current strengths of UK governance will be preserved. ‘We must not throw the baby out with the bathwater.’
The FRC has said it will seek input for its review from a range of stakeholders including its recently established Stakeholder Advisory Panel of high profile representatives from a broad spectrum of sectors. Once it has drawn up proposals, it will commence a consultation process ‘later in 2017’.
Whatever the outcome of the review, it is clear that any fallow period in governance regulation will be short-lived. As a deep-thinker from an earlier century might have said, "the game is on!" once again.