The Financial Reporting Council (FRC) has published a progress report on its review of the effectiveness of the Combined Code on Corporate Governance, which it began in March 2009.
The report summarises the results of the consultations and research that the FRC has carried out to date and invites views on various aspects of the Combined Code and its application. These are:
- The responsibilities of the chairman and non-executive directors.
- The composition of the board, including finding the right balance of independence and expertise.
- The frequency of directors’ re-election.
- Board information, development and support.
- Evaluation of the board’s effectiveness.
- The effectiveness of existing risk management systems.
- Remuneration policy and process.
- The usefulness of companies’ reporting on corporate governance.
- Engagement between boards and shareholders.
Sir Christopher Hogg, chair of the FRC, said: “The two main themes to emerge from our review to date are the importance of getting the proper challenge in the boardroom through picking the right people and maximising their contribution to the board’s performance, and the need for better engagement between boards and investors. There has been a lot of support for the Combined Code and the ‘comply or explain’ mechanism rather than greater prescription. It is seen as better able to react to developments in best practice, and because it can take account of the different circumstances in which companies operate it can set higher standards to which they should aspire. We share this view. The FRC will strengthen the Code where it is necessary to do so, but will do so in a proportionate way and will aim to avoid an increase in the overall level of prescription.”
The FRC is also considering the implications of the consultation paper on the governance of banks and other financial institutions issued by Sir David Walker on 16 July. That report contains recommendations that could be taken forward through amendments to the Combined Code.
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