Skip to content

24 March, 2023

Subscribe Advertise About Us
  • My Account
  • Register
  • Log In
  • Log Out

Board Agenda

  • Governance
  • Strategy
  • Risk
  • Ethics
  • News
    • Categories

      • View All
      • Board Moves
    • ChatGPT technology

      Could ChatGPT technology join the board?

      Although governance may stop artificial intelligence replacing anyone on the board today, AI may soon...

    • ethical decision-making Call for FTSE 100 companies to give guidance on ethics

      Most top firms have a published code of ethics, but many lack the framework to...

    • BlackRock Larry Fink Larry Fink puts focus on finance and inflation

      Although BlackRock’s CEO does not mention the term ‘ESG’ in his annual letter, he highlights...

  • Insight
    • Categories

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • data decision

      How to boost decision making

      Innovative digital tools can help boards to deliver against strategic objectives, but it is the...

    • remote working

      Navigating the new world of work

      Firms need to focus on building an inclusive environment and a culture of trust to...

    • digital transformation

      Digital transformation: Get the basics right

      Board involvement at the get-go will boost the chances of a successful digital transformation for...

  • Comment
      • View all
    • uncertainty in 2023

      Being a CEO in 2023: how to navigate uncertainty

      Agility, planning in the shorter term and bravery will all stand chief executives in good...

    • A week of business moving to the centre of human rights

      A week of events signals the initiatives underway to have companies play a central role...

    • audit reform IIA Why we need audit reform right now

      There is an "urgent need" for reform to the audit landscape as well as internal...

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • life sciences podcast Reform of NHS levy ‘harms UK competitiveness’

      Boards in the pharmaceutical and life sciences sector face increasingly difficult decisions, according to a...

    • Board priorities 2023 Board priorities 2023: tact, trust and transparency

      We asked key figures what would help boards this year. The answers ranged from 'smarter...

    • Group of investors/shareholders in glass building Climate issues likely to figure prominently at next year’s AGMs

      A recent webinar heard that say-on-climate voting is expected to rise, while ESG remains a...

  • Careers
      • View all
      • Selection
      • Board Moves
    • female ceo Less than a third of FTSE 100 executives are women

      In Europe as a whole, only 7.7% of top companies’ chief executives are female, gender...

    • board size Performance declines as boards grow in size

      Researchers found that investment dropped by 2-3 percentage points as companies passed from 12 to...

    • Silicon Valley governance Silicon Valley improves its governance

      Big technology companies are stealing a march over other top corporates when it comes to...

  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Corporate & Advisory Services
    • Diligent report

      Forrester: The Total Economic Impact Of Diligent Board & Leadership Collaboration

      Diligent Board Leadership & Collaboration reduced the risk of confidential material loss, supported decision-making, and...

    • Gender diversity barometer

      Barometer of Gender Diversity in Governing Bodies in Europe

      The 2023 Barometer of Gender Diversity in Governing Bodies in Europe looks at the 16...

    • geopolitical risk airmic

      Navigating geopolitical risk

      Today, the future feels less secure, and optimism is more restrained. Taking decisions in an...

  • Events
  • Search by topic
    • Governance
    • Strategy
    • Risk
    • Ethics
    • Regulation
    • ESG
    • Investor Relations
    • Selection
    • Board Expertise
    • finance
    • Technology

FRC: many firms ‘not transparent about their compliance with UK code’

by Gavin Hinks on March 2, 2021

Issues identified include difficulties in describing how stakeholder interests are considered and failure to limit the tenure of board chairs.

notebook on boardroom table

Image: Mariakray/Shutterstock.com

Companies appear to be struggling with governance provisions aimed at managing stakeholder engagement and measures to limit the term of board chairs.

The news comes in new guidance from the Financial Reporting Council (FRC), the UK governance watchdog, in which it spells out how to meet the corporate governance code’s principle of “comply or explain”, and calls for more transparency in reporting.

In offering advice on reporting, the FRC shines a spotlight on areas where companies encounter most difficulty. This follows a report last November in which the FRC took a close look at compliance with the UK code.

According to the new document: “One of the most concerning findings from our review was that many companies were not transparent about their compliance with the code.

“Several companies in our sample, including some that claimed full compliance with the code, on further investigation has not acknowledged departure from one or more provisions of the code.”

Stakeholder interests

Some companies fell short of describing how stakeholder interests have been considered or how they engaged with their workforces (they should be using either a director appointed by the workforces, a designated non-executive or a employee advisory panel).

It seems companies can describe what the interests of stakeholders are. “However, they do not describe how these were taken into account in board discussions and decision-making and what was the outcome,” the FRC says.

Further problems arose with reporting the tenure of board chairs. The code says the limit is nine years, but the FRC found unexplained cases of sitting chairs who had served for longer, including one who had occupied the role for 20 years.

“Companies declare compliance with this provision if the chair has been on the board for no more than nine years,” says the FRC.

“We support departures from the code when it is to facilitate effective succession planning or the development of a diverse board, but such cases should still be acknowledged as departure from the code and accompanied by an effective explanation.”

Companies also score poorly on their ability to describe the work of their nominations, audit and remuneration committee, as described in provisions 23, 26 and 41 of the UK code, provision on post-employment shareholdings and measures on executive pensions.

Mixed picture of compliance

Engagement with stakeholders and the workforce over pay is also an issue. The FRC says: “If a company has not engaged with shareholders or the workforce in relation to remuneration, it is not compliant with Provision 40, nor 41.”

November saw the FRC reveal a mixed picture of compliance and accused some companies of treating the code as a “box ticking exercises” producing reporting that is “formulaic”. In one example of poor reporting, the FRC said though many companies state the importance of diversity in the boardroom and in succession plans they “offered little explanation to set out what they are doing to deliver that.”

The FRC’s chief executive, Sir Jon Thompson, said the review highlighted examples of good reporting, but added: “It’s clear that some companies are continuing to take a formulaic approach to corporate governance driven by compliance, rather than focusing on outcomes, supported by high quality and transparent evidence.”

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • KPMG UK extends Bina Mehta’s term as chair
    December 1, 2021
    KPMG logo on website

    Mehta was initially elected to act as temporary chair for a 12-month period, but will now remain in post until 2024.

  • FRC launches probe into professional exams
    July 19, 2022
    cheating professional exams

    Cheating overseas sparks investigation by the Financial Reporting Council into conduct of UK accountancy and audit exams.

  • Campaigners urge FRC to name and shame failing audits
    October 5, 2021
    Businessman looking at audit figures

    Transparency groups including Greenpeace UK say failing to disclose the audits involved "risks creating a general lack of confidence in all audit opinions".

  • FRC warns over climate disclosures ahead of COP26 summit
    October 27, 2021
    COP26 flag

    Regulator's annual review of corporate reporting says it will be “closely revising how companies report against the new TCFD requirements”.

For thoughtful journalism, expert insights on corporate governance and an extensive library of reports, guides and tools to help boards and directors navigate the complexities of their roles, subscribe to Board Agenda

board tenure, corporate reporting, financial reporting, Financial Reporting Council, FRC, stakeholders, UK Corporate Governance Code

Search


Sign up to our Newsletter

Receive independent news, thoughtful journalism & expert insights about leadership, corporate governance & key boardroom issues straight to your inbox every week.

SIGN UP

Follow Us

 

 

 

 

Most Popular

  • ESG resilience requires leaders to manage without certainty
  • Into the mind of white-collar criminals
  • News round-up: this week in governance
  • Top stories of 2022: corporate governance gets political
  • Larry Fink puts focus on finance and inflation

Featured Partner Profile

Diligent

Diligent

Diligent Corporation, which was founded in 2001, is headquartered in New York, NY with a European HQ in London. Diligent’s modern governance platform empowers leaders and teams at every level of the organisation to digitally transform and create ...

Featured Partner Resources

2022 AGM Season Forecast: An Eye on The Horizon

To help prepare for AGMs in 2022, Equiniti (EQ) hi...

Stakeholder Engagement: A Roadmap for UK Plc Boards

This guide aims to provide directors and their col...

Digital Boards: How Technology Adoption is Driving Culture Change and Resiliency

Digital tools proved their worth to boards during ...
Leadership in AI report

Leadership in AI

This report from Board Agenda and Mazars, in assoc...
Creativity in a Crisis: a Boardroom Map for Innovation

Creativity in a Crisis: a Boardroom Map for Innovation

In the uncertain times at the height of any crisis...
Board Directors Guide to D&O Liability Insurance - November 2020 - AIG & Board Agenda

Board Directors' Guide to D&O Liability Insurance

Directors face liability over a range of new threa...
Leadership-in-Risk-Management-Board-Report

Leadership in Risk Management: Board Report

Board Agenda, in association with Mazars and INSEA...
Director's Guide to Internal Investigations

A Director's Guide to Conducting Internal Investigations

An internal investigation must be handled meticulo...

 


 

ADVERTISE – FREE CORPORATE LISTING

FREE - Add your company profile to our Corporate & Advisory Directory.
ADD

ADVERTISE – PROMOTE YOUR REPORTS & WHITEPAPERS

FREE - Add your company profile to our Corporate & Advisory Directory.
Add Resource

Register Free

Register to receive free article views, selected resource downloads, and all the latest news alerts straight to your inbox. Register


  • Editors & Contributors
  • Editorial Advisory Board
  • Corporate & Advisory Services
  • Media Marketing Solutions
  • Contact Us
  • Careers
  • Board Director Network
  • Terms & Conditions
  • Privacy Policy
  • Cookies
  • Sitemap
|