After 2 years of thinking, consulting and finally implementing changes, the UK governance regime is quite different. And in its latest review the Financial Reporting Council has highlighted the speed with which changes to the UK’s corporate code, introduced last year, have been taken up by companies. (For example, 80 per cent of FTSE 350 companies put all their directors up for re-election this year, it said, in response to new guidelines).
However, the jury is still out on how well companies are changing their communications of governance issues. The 2011 class of annual reports to be issued next year will indicate the extent to which companies have embraced the need to engage with investors.
Meanwhile, the FRC is also leaping to a stout defence of the comply or explain regime. The European Commission had consulted on whether – in the wake of the financial crisis – a more rigid set of rules was needed. "Some in Europe see boards and asset managers as part of the problem rather than part of the solution, and would therefore wish to restrict their freedom of action by replacing a ‘comply or explain’ regime with hard law," noted the FRC paper, adding that it aimed combat "inappropriate regulation".
However, there was more to do. The FRC said that it would consult on further changes in the coming year, including a requirement for boards to disclose their policy on diversity and an extension of the remit of audit committees, especially with their role on risk oversight.