December 2009

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The new look Code... the FRC publishes its final report following the latest review of the Combined Code


Over the past year we have been following and raising awareness of the FRC’s review into the Combined Code, encouraging clients to submit their comments about the implications of the review of their own organisations. This month, The FRC produced its final report into the review, which has been lead by Sir Christopher Hogg, Chairman of the FRC, and has launched a consultation on its proposals to reform what will now be called The UK Corporate Governance Code. The name of the Code has been changed in order to avoid confusion among overseas investors and the proposals set out in the revised draft Code take into account the lessons learned from the recent financial crisis.

The full report produced by the FRC can be viewed by clicking here. Below we present a summary of the main proposals as outlined by the FRC:

  • To enhance accountability to shareholders, the FRC proposes either the annual re-election of the chairman or of the whole board.
  • To ensure the board is well balanced and challenging, new principles are put forward on the leadership of the chairman, the roles, skills and independence of the non-executive directors and their level of time commitment.
  • To enhance the board’s performance and awareness of its strengths and weaknesses, board evaluation reviews should be externally facilitated at least every three years and the chairman should hold regular development reviews with each director.
  • To improve risk management, new principles are proposed on the board’s responsibility for and handling of risk.
  • Proposals are also made to emphasise that performance-related pay should be aligned to the long-term interests of the company and its policy on risk.

Consultation on the draft revised Code will end on 5 March 2010. The FRC states that, depending on the outcome of this consultation and the necessary changes to the Listing Rules, the intention is that the revised Code should apply to all listed companies with a Premium Listing for financial years beginning on or after 29 June 2010.