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FRC Consults On Combined Code On Corporate Governance

by Robin Pilgrim, LawAndTax-News.com, London

23 April 2007

The UK's Financial Reporting Council last week announced that it had initiated an assessment of the progress made in implementing the Combined Code on Corporate Governance.

The Combined Code on Corporate Governance sets out standards of good practice in relation to issues such as board composition and development, remuneration, accountability and audit and relations with shareholders.

All companies incorporated in the UK and listed on the Main Market of the London Stock Exchange are required under the Listing Rules to report on how they have applied the Combined Code in their annual report and accounts, and either to confirm that they have complied with the Code's provisions or - where they have not - to provide an explanation (known as “comply or explain”).

The FRC is inviting views from listed companies, directors, investors and other interested parties on all aspects of the Code, but especially on the following issues:

  • Does the Code support better board performance over time?
  • Is the “comply or explain” approach working effectively?
  • What impact has the Code had on smaller companies?
  • Do disclosures on the Combined Code in annual reports provide useful information to shareholders at proportionate cost to companies?

Launching the consultation exercise, Sir Christopher Hogg, Chairman of the Financial Reporting Council, explained that:

“The feedback we have received to date suggests that, while there are some points of concern, the Code is working reasonably well and having a broadly beneficial impact. We want to know whether this view is shared by the market as whole."

"There is no presumption on the FRC’s part that this exercise will lead to change. No amendments to the Code will be proposed unless there is clear justification, and if any are proposed there will be a separate consultation.”

Comments are invited until July 20, and the FRC will publish its findings before the end of 2007.

The Financial Reporting Council (FRC) is the independent regulator in the UK responsible for promoting confidence in corporate reporting and governance.

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