The Institute of Directors has welcomed high levels of compliance with the UK Corporate Governance Code as a report by the Financial Reporting Council (FRC) showed that 90% of the FTSE 350 complied with all but one or two provisions of the Code.
Oliver Parry, Senior Corporate Governance Adviser at the IoD, said:
“We welcome today’s announcement by the Financial Reporting Council (FRC) that the quality of corporate governance in the UK ‘remains high.’ That 90 per cent of the FTSE 350 comply with all but one or two provisions of the Code is testament to how determined UK boards are to remain ‘best in class’ around the world for corporate governance. The FRC should also be applauded for its work in this area and we look forward to seeing their separate reports on succession planning and culture.
“However, it is important to remember that although a commitment to the Code may contribute to better governance, there are limitations to what compliance, on its own, can achieve. The IoD’s Good Governance Initiative shows that measuring governance as well as defining it is much more difficult than just ticking boxes.
“It is also no surprise that take-up of the revised Code, introduced in 2014, has been low, with companies rightly taking time to consider how to report on the core issues of risk management, internal controls and how to get their heads around the ‘crystal ball gazing’ that is required to deal with the long term viability statement. With a further consultation to the Code having only recently closed, the market may again find it a struggle to comply with the latest tinkering, especially in respect to the impact of the EU Audit Directive. It would be more appropriate for the Code to be revised once every four years, except in the event of exceptional market developments. This would allow companies more time to adjust to substantive governance changes.”