The FRC has published a consultation on the Code with comments requested by 28 February 2018. They aim to publish a revised Code in early summer applying for accounting periods beginning on or after 1 January 2019.
Although this represents a comprehensive review of the Code, key elements remain and the revised Code emphasises the importance of applying the Principles which should be linked to the company’s strategy and business model.
Key changes proposed include:
- gathering the views of the workforce, for example a director appointed from the workforce, a formal workforce advisory panel or a designated non-executive directors. The term “workforce” is used to encourage companies to consider how their actions impact on all workers, not only those with formal contracts of employment;
- strengthening the Code Provisions on independence such that an individual should not be considered independent if they have a current or a previous relationship with the company and the chair should be independent at all times;
- clarifying that ”significant”, in relation to the proportion of votes cast against a resolution, is more than 20% and requiring the company to publish, not more than six months after the vote, an update on the actions it has taken to understand the reasons behind the result;
- chairs of remuneration committees will need to have served for at least 12 months’ on a remuneration committee prior to becoming chair; and
- requiring all directors to stand for re-election annually, not just directors of FTSE 350 companies, and to disclose, in their annual reports, the gender balance of those in the senior management (eg. the executive committee or first layer of management below board level including the company secretary) and their direct reports.
Reforms to the UK corporate governance framework have been topical for a number of years now and this review of the Code is only one of a number of proposals arising from the Government’s Green Paper on corporate governance.