Up at the top of the current pronouncements from the UK’s Financial Reporting Council there is a new and additional logo. It celebrates 25 years of the UK Corporate Governance Code, for which the FRC is responsible. Anniversaries are times to celebrate, and the achievements of the steadily evolving Code are certainly worthy of that. But they are also times to take stock and seek change and reform where necessary. And this is what is happening. The FRC recently released its response to the UK Government’s Green Paper on such reform. And in particular it drew attention to the lack of coherent action relating to Section 172 of the Companies Act. This Section says that the duty of company directors requires them to act in a way that is most likely to promote the success of the company for the benefit of its members as a whole. The FRC wants this to be wider and for directors to be more accountable.

‘There is a clear link’, it says in its letter to the Government, ‘between the duty under section 172 and the reputation and brand values of companies, which encourages directors and responsible shareholders to engage in a full consideration of these wider factors’. And adding detail to this idea the FRC says: ‘There is no specific reporting requirement on how the matters referred to in section 172 are taken into account by directors in promoting the success of the company. Ultimately boards should be required to demonstrate how they had regard to wider stakeholders in their key decisions. There is a need to explore mechanisms which will enable this section to deliver its purpose more effectively. This would best be achieved by introducing a legislative requirement to report against the section’.

These ideas have been backed by a powerful grouping of other bodies, coordinated by David Pitt-Watson, one of the most respected names in the corporate governance field, in a letter to the Prime Minister. The letter, representing the views of the International Corporate Governance Network, the UK’s Institute of Directors, the governance institute ICSA, and the Trades Union Congress, also focuses on the section 172 issue.

‘There is no effective mechanism for policing this law’, it says, ‘which means that if companies – particularly private companies where there is little or no institutional oversight – do abuse the law, they are not always held to account. This gap in our governance system has allowed the poor practice of some to undermine people’s trust and confidence’. It is about global objectives. For this to work well you need to look at the company directors and how they behave. But quite another question is who are the shareholders? And the world has changed in that regard too.

A paper from the governance institute, ICSA, makes the point that ‘In the 25 years since the Cadbury Committee reported, our expectation of corporate governance has gone from “improving control and accountability” to “restoring faith in capitalism”’. The original objectives may not be so effective on a global stage. As the paper points out: ‘It may be tempting to believe that shareholder interest can be a proxy for public interest. In 1992 – when 70% of shares were owned by UK pension funds, insurance companies and individuals – that might even have seemed plausible. Yet looking at the ownership base today, with over 50% of shares owned by overseas investors, it would be illogical to do so. Why should we expect the citizens of Norway or the retired teachers of California, for example, to feel they have a responsibility to look after the best interests of UK society?’ In such a world CalPERs, the Californian institution that is the largest US pension fund, is indeed just as important as the British Rail pension fund, if not more so.

And just to underline this Chris Hodge, policy advisor at ICSA, had this to say at the launch of the paper: ‘Fast forward to 2015, and the G20/OECD Principles – the global standard for governance - defined the purpose of corporate governance as follows: “To help build an environment of trust, transparency and accountability necessary for fostering long-term investment, financial stability and business integrity, thereby supporting stronger growth and more inclusive societies”’.

We are indeed in a different world. But it is also important to remember the fundamentals. The financial statements are prepared for a particular type of user, the investors, the providers of risk capital and credit, and everything there has to be provided through that lens. It is clear that the shareholder today needs to be an ‘enlightened shareholder’ and therefore told about many non-financial factors affecting companies’ long-term value creation. But all of that information needs to be fair, balanced and understandable and still needs to be told through the lens of the provider of capital. Multi-stakeholder information can be wide. The statutory information must remain focussed on its specific purpose.