Corporate Governance

The UK has adopted a code-based approach to corporate governance in premium listed companies, which companies follow by applying the Principles and disclosing how they are applied, and by taking a "comply or explain" approach to the provisions - either complying 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

Together with the Companies Act 2006, 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.  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 new statements regarding the principal risks, viability and prospects of the company.

In July 2018, the FRC published a "new style" Code, that is now in effect, accompanied by revised Guidance on Board Effectiveness. This was a substantial change, building on other work done by the FRC and on the Government's corporate governance reform agenda. It brought matters such as corporate purpose, culture, stakeholder engagement, succession planning and diversity into far greater prominence. The Introduction to the 2018 Code explains a renewed focus on disclosure around how the company applies the Principles of the Code.

2024 Code

In May 2023 the FRC launched a consultation on changes to the Code and, following its November 2023 policy update on updates to the Code in light of the Government's withdrawal of proposed secondary legislation covering the Audit & Assurance Policy, the Resilience Statement, the Material Fraud Statement and enhanced reporting on distributions, issued an updated Corporate Governance Code in January 2024 .  The 2024 Code will apply to accounting periods commencing on or after 1 January 2025 except for Provision 29 – the declaration on the effectiveness of the risk management and internal control framework – which will apply for accounting periods commencing on or after 1 January 2026 to allow sufficient time for implementation

In addition to the updated Code, the FRC has issued guidance to support companies in the application of the 2024 Code.  The FRC stresses that the guidance should not be viewed as part of the 2024 Code and should not be seen as a requirement of the FRC. It is aimed at contributing helpful context to a board’s consideration of how they might go about complying with the 2024 Code.  This guidance also incorporates previously published FRC guidance, namely the Guidance on Board Effectiveness, Guidance on Risk Management, Internal Control and Related Financial and Business Reporting and Guidance on Audit Committees. 

Until the 2024 Code comes into effect, the 2018 Code applies and continues to be supported by: The Guidance on Board EffectivenessThe Guidance on Audit Committees; and The Guidance on Risk Management, Internal Controls and Related Financial Business Reporting.  

Corporate governance reforms on pay and stakeholder engagement

The Companies (Miscellaneous Reporting) Regulations 2018 were made in July 2018. These represent the legislative strand of the Government’s package of corporate governance reforms announced by BEIS in August 2017. Elements of the Regulations apply to both listed and to private companies. The requirements they introduced include the section 172(1) statement, directors’ report requirements on stakeholder engagement, disclosure of corporate governance arrangements for large private companies and the CEO pay ratio disclosure.  These requirements align with the 2018 UK Corporate Governance Code that came into effect at the same time.

Large private companies - disclosure of corporate governance arrangements

Legislation was published in July 2018 meaning that the largest private companies now have to prepare disclosures around their corporate governance arrangements in their directors’ report.  These companies are not required to follow any particular corporate governance code or principles in order to comply with the legislative requirements. However, to support these companies, corporate governance principles for large private companies were published on behalf of James Wates CBE, Chair of the Coalition Group (the Wates Principles).  The Wates Principles were published in December 2018.

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