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We comment on proposed revisions to the UK Corporate Governance Code

  • Final response on proposed revisions to UK Corp Gov Code June 2014 Image

03 Jul 2014

We have published our comment letter on the FRC's consultation on changes to the UK Corporate Governance Code. Overall, we support the proposed revisions to the UK Corporate Governance Code (“the Code”). Given the importance of implementing the Sharman principles without further delay, we have aimed to provide practical and specific comments on the proposals.

Our key points in response to this consultation are that we:

  • support the changes around remuneration and AGM results subject to clarification of the wording in the Main Principle;
  • continue to believe that the proposed amendments around risk management and internal control represent good business practice and should serve to increase confidence in the governance of UK listed companies;
  • support the proposed introduction of a new future viability statement which allows boards the flexibility to look forward over a period which best fits their business planning and investment cycles; and
  • support the retention of the specific statement on the appropriateness of the going concern basis of accounting. The FRC’s introduction of this statement in its current form in 2008 has done much to promote good discipline in the board’s involvement in forecasting.

In our view, without further guidance, some elements of the proposed new disclosures and practices could result in differing interpretations being adopted by companies.   We believe that this is particularly true of the requirement to explain what actions have been or are being taken to remedy any significant failings or weaknesses identified in the review of the systems of risk management and internal control; in this area we think that executive directors, audit committees and auditors would welcome guidance on interpretation. This would provide clarity into what might otherwise be difficult conversations in the boardroom and provide investors with confidence that the principles have been applied consistently across their portfolio.

Further comments and a full response to all questions raised in the invitation to comment are contained within the full comment letter.

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