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Corporate Governance

The UK has adopted a “comply or explain” code-based approach to corporate governance which companies can follow by either complying with the provisions or explaining why they have not complied in the annual report.  More information on the UK approach to Corporate Governance is contained on the FRC website.

The key players are shareholders, the board of directors including sub-committees, and regulators.  Together they inform how corporate governance is interpreted and applied in the UK. 

 The framework

The following sources of material form the framework for governance in the UK: 

 The Code Timeline

The UK has become known as a leader in the "comply or explain" corporate governance regime. Beginning with the Cadbury Code in 1992, the governance codes have been added to at regular intervals since that date. In 1995 the Greenbury Report set out recommendations on the remuneration of directors. In 1998 the Cadbury and Greenbury Reports were brought together by the Hampel Report and the Combined Code was issued. In 1999 the Turnbull Guidance on internal control was issued for directors. Following the Enron and WorldCom scandals, the Combined Code was updated in 2003 to include the recommendations of the Higgs Report on non-executive directors and the Smith Report on audit committees. Further small amendments were made to the Combined Code in 2006 and 2008.  In 2010 the Code was renamed the UK Corporate Governance Code.  The 2012 Code introduced new regulations, including diversity disclosures to support the recommendations arising from the Lord Davies report.  The 2014 Code introduced some new requirements in relation to directors' remuneration and requires companies to make a new statement regarding the 'prospects of the company'. The "comply or explain" regime has been retained throughout.

In June 2016, the FRC issued the 2016 UK Corporate Governance Code, the revised Guidance on Audit Committees, the Ethical Standard 2016 and revised International Standards on Auditing (UK) arising from the UK implementation of the EU Audit Regulation and Directive. These complete the FRC’s implementation of the EU Audit Regulation and Directive.  

A consultation was published by the FRC in December 2017 for a new-style UK Corporate Governance Code together with revised Guidance on Board Effectiveness and some questions on the future of the Stewardship Code.  The consultation run until 28 February 2018.

Corporate Governance Principles for Large Private Companies

On 13 June 2018, the Financial Reporting Council (FRC) published a consultation paper on corporate governance principles for large private companies on behalf of James Wates CBE, Chair of the Coalition Group (the Principles).  Comments to the consultation paper are requested by 7 September 2018

Corporate governance reforms on pay and stakeholder engagement

The Companies (Miscellaneous Reporting) Regulations 2018 were laid before Parliament in June 2018. These represent the legislative strand of the Government’s package of corporate governance reforms announced by BEIS in August 2017.  Subject to Parliamentary approval, the new requirements will apply to company reporting on financial years starting on or after 1 January 2019. This timetable will align with the Financial Reporting Council’s plans for bringing a revised UK Corporate Governance Code into effect.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.