On 15 January 2015, the Financial Reporting Council ("FRC") published a report on developments in corporate governance during 2014, reviewing the impact and implementation of the UK Corporate Governance and Stewardship Codes over the last 12 months.

As regards the UK Corporate Governance Code, the report's key findings are set out below.

  • Overall compliance rates: Compliance with the Code remains high with over 90% of FTSE 350 companies reporting that they were complying with the vast majority of its provisions. However, the FRC notes that the standard of explanations by those who deviate from the Code continues to be variable.
  • Succession planning and appointment: There should be a focus on improving the reporting of succession planning to address the more strategic issues around the long-term composition of boards for both executive and non-executive positions.
  • Diversity: Data shows that 85% of FTSE 100 companies had a clear diversity policy whereas for FTSE 101-201 companies the figure was only 56%. The FRC notes that this is an area where more improvement is required. More positively, the headline figures for female directorships and executive directors in FTSE 100 companies are up from 18.9% to 22.8% and 6% to 8.4% respectively.
  • Election of directors: It was noted that a significant number of companies gave no detail other than the name of the relevant director when passing resolutions for the election of directors. The FRC recommends that an explanation of how individual directors contribute to the effectiveness of the board as a whole should be disclosed.

As regards the Stewardship Code, the report notes that there are indicators that wider engagement is taking place between larger companies and their major shareholders. However, across the rest of the listed sector, the FRC has concerns regarding the state of signatories' commitment to the Code and, that for some, signing up to the Code is seen as a "box ticking exercise" rather than a "basis for good quality engagement".

The report is available here:

https://www.frc.org.uk/OurWork/Publications.aspx?searchtext=&searchmode=anyword&searchfilter=0&searchfilter1=0&searchfilter2=2;&searchfilter3=0 &frcdaterangesmartsearchfilter=201501150000;201504152359.

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