The Financial Reporting Council (FRC) has released the 2018 UK Corporate Governance Code (the Code), applicable to accounting periods beginning on or after 1 January 2019. The Code applies to all companies with a premium listing, whether incorporated in the UK or elsewhere.
The Code is comprised of 18 principles supported by more detailed provisions. Effective application of the principles and compliance with the provisions are intended to enable companies to demonstrate, through their reporting, how governance contributes to long term sustainable success.
The main changes include:
- New provisions which require greater board engagement with the workforce and other stakeholders. The Code asks boards to describe how they have considered the interests of stakeholders and directors’ duties under Section 172 of the Companies Act 2006 – these are onerous and are likely to be a yardstick for regulators’ judgement of directors’ behaviour going forward.
- Requirements for boards to promote a culture which aligns with the company’s purpose, values and strategy; and to assess how value is preserved over the long-term.
- Emphasis on the need to refresh boards and undertake succession planning as well as limiting to nine years the length of term that chairs remain in post (except in exceptional circumstances).
- Strengthening the role of the nomination committee in succession planning, board diversity and reporting on the work of the external board evaluator.
- Remuneration committees taking into account workforce remuneration and related policies when setting director remuneration.
For further information, please contact Tom McMorrow.