Following his recent evidence to the BEIS Select Committee
inquiry into corporate governance, FRC Chief Executive Stephen
Haddrill has written to the Committee setting out the
FRC's recommendations and how they could be implemented. These
are specific proposals which go beyond many of the options set out
in the Government's recent green paper on corporate governance
reform and include the following:
the extension of the FRC's powers
to secure information to enable it to test the quality of corporate
governance information and companies' explanations for
non-compliance with the UK Corporate Governance Code and take
action as a result. At present, the FRC only has powers to monitor
the strategic report and financial statements.
improving the operation of Section
172 Companies Act 2006 (the duty of directors to promote the
success of the company). The FRC suggests amending the UK Corporate
Governance Code or Strategic Report Guidance to require companies
to disclose in their annual report how they have gone about taking
account of the interests of stakeholders. The FRC considers that
there is also a case for a similar requirement to be placed on
private companies but this would require a change to the
Government's regulations on corporate reporting.
a government review of the
enforcement framework to hold directors and other in senior
positions more effectively to account when they fail in their
the development by the FRC of a
corporate governance code for private companies. Regulatory
underpinning would be needed to require adherence to such a code
and public reporting on how that had been achieved or an
explanation of why it is not appropriate to do so.
the development by the FRC of a code
of conduct for directors, sitting alongside the codified duties in
the Companies Act 2006, covering ethical duties. A statutory
provision would need to be put in place to enable oversight by the
FRC of directors subject to the code. Alternatively, the
directors' disqualification regime under the Company Directors
Disqualification Act 1986 could be extended.
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