On 5 December 2017, the FRC published for consultation proposed revisions to the U.K. Corporate Governance Code (UKCGC) and Guidance on Board Effectiveness. The closing date for responses to the consultation is 28 February 2018. Following consideration of responses to the consultation, the FRC is aiming to publish a final version of the new UKCGC by early summer 2018, with the expectation that it will apply to accounting periods beginning on or after 1 January 2019.
Some of the key changes are as follows:
- The FRC states that the revised UKCGC is "...shorter and sharper...," comprising 17 Principles and 41 Provisions divided into five sections. The new Principles and Provisions are intended to address the elements of governance most important to board effectiveness and corporate purpose, and to focus on stakeholders (rather than just shareholders), integrity and corporate culture, diversity and how the overall governance of the company contributes to its long-term success.
- The "comply or explain" principle is preserved.
- There is a new UKCGC Principle emphasising the importance of the intrinsic value of corporate culture.
- Provision 6 sets out the requirement that where more than 20% of votes have been cast against a resolution, the company must explain what actions it intends to take to consult with shareholders to understand this vote. The company must provide a further update six months later and a final summary in the annual report. Please see "Investment Association Launches Public Register of Listed Companies Which Have Had Significant Shareholder Rebellions" above for details of the public register of this information that the IA will keep.
- Principle J aims to broaden boards' perception of diversity and ensure appointment and succession planning are designed to promote diversity of gender and social and ethnic backgrounds. Provision 23 encourages reporting on such actions.
- The Hampton-Alexander Review recommended that the UKCGC be revised to require that FTSE 350 companies disclose in their annual report the gender balance on their Executive Committee. The FRC proposes to extend this requirement to companies outside the FTSE 350 as well.
- The FRC has also provided revised Guidance on Board Effectiveness. It anticipates further changes in response to the results of the UKCGC consultation.
The proposed revisions can be found here:
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