It’s reasonable to consider the UK Corporate Governance Code the most widely-respected governance guidance in the world. It receives a strong run for its money from South Africa’s King I, II, III and IV but, for a variety of reasons, the UK Code is pre-eminent. Many Codes around the world have used the UK Code as a template for creating their own governance framework and, while the UK Code addresses a number of specific UK issues which are simply not relevant to organisations in other jurisdictions, it remains the global exemplar of ‘what good looks like’.
So the fact that the Financial Reporting Council (FRC) – the Code’s owner – has decided to revise the current document is creating interest internationally, as well as closer to home. There have been a number of revisions of the Code in the past, but it feels like we are at an inflection point, and that there is much at stake in terms of how the Code might now change.
David Styles, the Director of Corporate Governance at the FRC, and the person who will ‘hold the pen’ in redrafting the document, spoke to the Leadership Development Programme* this week on how he saw things panning out.
He explained that the FRC had announced, in February, not just a revision to the Code, but a fundamental review – taking account of the FRC’s work on corporate culture and succession planning, and issues raised in two important and high-profile consultations – one by the UK Government, the other by the UK Parliament. The FRC will then consult on changes to the Code, an exercise expected to take place in Autumn 2017.
David added that work will also be undertaken to review supporting Guidance, particularly the influential and respected FRC publication, the Guidance on Board Effectiveness (which I produced for the FRC when I was Policy Director at the Institute of Chartered Secretaries and Administrators).
David’s excellent presentation, and the conversation which followed, made clear the importance of the key question – ‘who is the Code for?’ The answer is that it has become the cornerstone for many governance-focused stakeholders – companies, investors, proxy advisers, and the many other organisations (public sector, not-for-profit etc.) who refer to it as a source of good-practice guidance.
Which makes finding a ‘silver bullet’ – which will transform the Code into a document which works for everyone – a challenge I am happy to leave to other governance professionals.
But for me, the enduring appeal of the Code is that, for the past 25 years, it has provided a framework for helping boards and directors become more effective. The Code has not been able to prevent a number of cases of corporate value destruction (though it might have, had its provisions been observed by the companies which failed), and nor can the Code, on its own, resolve some difficult public policy issues, including the thorny problem of executive remuneration. But one thing is clear – the existence of the Code has helped make the world a better place. We should acknowledge the benefits it has brought, and be willing to work to make it fit-for-purpose for the next 25 years.
*Leadership Development Programme
Would you like to become a more effective, and successful, company secretary? Through a series of coaching and mentoring interventions, and networking dinners, the Programme helps board-focused professionals develop the soft skills required to perform at the top level.
If you would like to join the Programme, or are interested in attending the next dinner, please contact Seamus Gillen at seamus@valuelapha.com, and on +44 (0)7739 088208.
For one attendee’s comments on this week’s dinner, click here.