Regulator wants more consistent compliance

14 Jan 2014

If the quality of explanations companies give for their departures from the UK Corporate Governance Code (the Code) does not improve, further steps may be taken to ensure that all the criteria in the Code are consistently applied.

The UK’s regulatory body, the Financial Reporting Council (FRC), indicated its concern in its annual review of the impact and implementation of the Code and said that it will continue to review stated departures from the Code. It is also concerned about the quality of reporting outside the FTSE 100 and will, it says, be paying close attention to this – diversity policy disclosures being one area of focus.

Generally, however, compliance with the Code remains high according to the annual review. In the FTSE 350, 57% of companies stated full compliance – 6% more than last year – and 85% of the remainder complied with all but one or two of the Code’s provisions.

The FRC’s other planned projects for 2014 are in the areas of risk management and going concern (including the implementation of Sharman), audit reform (the implementation of the Competition Commission’s recommendations) and remuneration. The focus will, however, be on the quality of implementation rather than further changes.

They will also consider whether to consult on allowing companies to place their full corporate governance statement on their website, with a less full version in the annual report and accounts. “This would be a particularly welcome development for those companies who for some time have been keen to innovate in their governance reporting,” said PwC governance expert John Patterson.