Shorter and Sharper: The UK Streamlines its Corporate Governance Regime
The UK’s resolution for 2019 is to trim down its Corporate Governance Code. And it starts this summer.
On December 5, 2017, the UK's Financial Reporting Council (FRC) put forth proposed revisions to the Corporate Governance Code (the Code) which are slated to be introduced early this summer and set in motion on January 1, 2019. The FRC's goal is to make the Code “shorter and sharper” with supporting principles either removed and incorporated into new principles and provisions or into supplementary guidance. The revisions address director independence, executive remuneration and stakeholder engagement, with a particular emphasis on ensuring the views of the workforce are heard at board level.
If adopted, the revisions will necessitate significant alterations to board practices and corporate reporting in the UK and Ireland. Companies will need to consider the implications as soon as possible to ensure compliance by 2019 and effectively communicate the changes through strong reporting in the first annual report after the revised Code is finalized. Those companies that drag their feet could face dissent from institutional shareholders and proxy advisors, both of whom use the Code as clear guidance for what constitutes best practice.
For companies looking to get out ahead, this memo, recently published in Harvard Law School Forum, provides crucial guidance.