Skip to content

11 July, 2025

  • Saved Articles
  • My Account
  • Subscribe
  • Log In
  • Log Out

Board Agenda

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

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • EU sustainability

      Omnibus package must not undermine EU sustainability

      Now is the time for Europe to speed up green transition, rather than slow it...

    • high pay

      Pay gap transparency needs to be better

      It’s not unknown for a CEO to earn 500 times as much the median employee,...

    • executive pay

      Executive pay trends in 2025

      Opposition to remuneration reports has grown sharply, according to Georgeson’s analysis of voting outcomes in...

  • Comment
      • View all
    • EU sustainability

      Omnibus package must not undermine EU sustainability

      Now is the time for Europe to speed up green transition, rather than slow it...

    • high pay Pay gap transparency needs to be better

      It’s not unknown for a CEO to earn 500 times as much the median employee,...

    • future-proof governance levers How to future-proof your business

      For boards to bolster resilience and create value in a polycrisis, a combination of hard...

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • UK Corporate Governance Code Board meetings ‘are not up to scratch’

      Nearly three-quarters of board members believe the board’s performance in meetings needs improvement, an expert...

    • financial sanctions Tariffs chaos drives boardroom focus on resilience

      Business leaders will prioritise the resilience of their organisations in the face of economic upheaval...

    • supply chain oversight Act now on supply chain oversight, boards warned

      Board directors need to critically engage with the business’s supply chain activity, a panel of...

  • Board Careers
  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Board Advisory & Corporate Services
    • C-suite barometer: outlook 2025 – UK insights

      Forvis Mazars draws UK insights from its global study and looks at UK executives’ strategic...

    • Talent Management 2025 Mind Gym

      Talent Management in 2025

      From rethinking leadership to wrestling with AI, MindGym's report reveals the trends shaping talent strategies...

    • Korn Ferry CHRO 2025 (Copy)

      On The Highwire: Being a CHRO in 2025

      Korn Ferry surveyed 750 senior HR leaders (including 450 CHROs) to understand their key priorities...

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

The 30-year itch: time to ditch the UK Corporate Governance Code

by Bobby Reddy and Brian Cheffins on July 1, 2022

Now that governance has come of age, businesses should be able to innovate within the boundaries of good regulation.

Man with magnifying glass

Image: FGC/Shutterstock

The venerable Cadbury Code of Best Practice, the precursor to the modern-day UK Corporate Governance Code, is 30 years old this year. Its twentieth anniversary was marked with substantial media coverage, a book on the history of the Cadbury committee, and a celebratory series of essays instigated by the Code’s current custodian, the Financial Reporting Council (FRC). Thus far, however, the thirtieth anniversary has passed with little fanfare. Admiration for the Code may be waning. In recent research, we go further and argue that the UK Corporate Governance Code should be abolished.

The Cadbury Code was a succinct two-page corporate governance trailblazer, pioneering the concept of “comply-or-explain”, under which companies could either comply with Code provisions or explain departures from it. As the years have passed, though, the Code has ballooned into the expansive UK Corporate Governance Code, which present-day premium listed companies must address.

Ticking governance boxes

While listed companies are not required per se to comply with the Code, its growth poses challenges for companies since the compulsion to “comply” rather than “explain” has progressively intensified. Shareholders and FRC guidance, as well as the way various Code “recommendations” are framed, have led companies to engage in “box-ticking”. The scope to deviate correspondingly is narrower than the comply-or-explain rhetoric would suggest. Accordingly, the high-growth companies that UK policymakers are keen to attract to the London Stock Exchange have precious little scope to engage in governance innovation and to reject ill-suiting arrangements the Code recommends.

Much of the Code now substantively overlaps with other, more prescriptive, regulatory missives

Another strike against the UK Corporate Governance Code is that the governance raison d’être underpinning it has fallen into irrelevance. The original Cadbury Code mostly drew upon already known governance ideas but helped to ingrain in the market approaches that were still relatively fresh. In the ensuing decades, those recommendations have been standardised in the governance space.

Much of the Code now either substantively overlaps with other, more prescriptive, regulatory missives, or embraces banal common sense ideals from which no board would ever deviate, or at least would never acknowledge divergence. For example, surely boards do not need to be told that a “successful company is led by an effective and entrepreneurial board” or that the “chair leads the board and is responsible for its overall effectiveness in directing the company”?

Not for the purpose it was intended

Moreover, in recent years, policymakers have counterproductively co-opted the UK Corporate Governance Code to advance non-shareholder stakeholder causes, such as worker engagement and diversity. Additionally, recent FRC reviews of the Code imply that environmental and social issues will come to the fore in future versions of the Code. The Code is ill-suited for this particular task.

The operation of the Code relies upon shareholders reviewing Code-generated disclosures and lobbying appropriate listed companies for change. Although many stakeholder issues will impact on shareholder value, meaning shareholders will not sit on their hands, they will only go so far when intervening on behalf of non-shareholder constituencies.

Surely boards do not need to be told a “successful company is led by an effective and entrepreneurial board”

Worker engagement, diversity and climate change are undeniably issues with which policymakers must urgently engage. Simply dumping such matters into the Code, however, amounts to passing the buck in the likely vain hope that the market will make the world a better place, and gives public officials an excuse to postpone tough and necessary regulatory decisions.

Finally, abolition of the Code arguably could help to revive the UK’s flagging equity markets. “Over-governance” has been cited as a factor simultaneously deterring companies from listing on the London Stock Exchange and prompting existing listed companies to desert the market and return to the discreet existence private ownership largely affords. Abolishing the UK Corporate Governance Code would be a meaningful statement that the London Stock Exchange is evolving, and ready and raring to go as Britain seeks to keep pace with a rapidly evolving tech-driven world.

Regulation is still needed

We hasten to add that while we favour abolishing the UK Corporate Governance Code, we are not advocating full-scale deregulation. Good regulation done well can benefit public companies, market participants, UK equity markets and wider society alike.

With most UK Corporate Governance Code guidelines being well-entrenched as governance norms, now is the time to move away from a comply-or-explain Code to a streamlined set of mandatory governance disclosures that will give shareholders the governance information they really need. Listed companies, for their part, will have greater scope to innovate in the corporate governance space and will avoid the blight of box-ticking.

The Code has given years of sometimes exemplary service. It is now time to put it out to pasture. Controversial perhaps, but boards should ask themselves: would corporate governance really be less effective without the UK Corporate Governance Code?

Bobby V. Reddy is assistant professor of corporate law, and Brian R. Cheffins is the S.J. Berwin professor of corporate law, both in the Faculty of Law, University of Cambridge

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • ESG legislation: What are the FRC proposals?
    August 17, 2022
    FRC proposals sustainability ESG

    The FRC has set out its plans to help integrate sustainability into corporate governance, reporting and audit reforms.

  • Stakeholder engagement: it's time to ditch public vs private
    December 13, 2022
    Private vs public companies

    Our radically altered corporate governance landscape, in pursuit of sustainability, requires an updated distinction between types of company.

  • Years after Carillion’s collapse, the UK still waits for audit reform
    October 31, 2022
    minister

    Researchers say inquiry focused on apportioning blame to individuals, rather than investigating the regulatory system.

  • US corporate governance improvements 'slowed or stagnated' in 2021
    January 13, 2022
    Employees talking outside offices

    Report suggests crisis "fatigue" is eating away at gains made during 2020, with employee issues and ESG highlighted as concerns.

Search


Follow Us

Register Free

Stay in the know! Register to access the latest governance news; plus receive updates about our events and podcasts – Sign up here

 

Most Popular

Featured Resources

wef global risks 2025

The Global Risks Report 2025

The 20th edition of the Global Risks Report reveals an increasingly fractured global...
Supply chain management cover

Strategic Oversight in Supply Chain Management: A Guide for Corporate Boards 2025

Supply chains have become complex, interdependent and opaque and—according to research...
OB-Cyber-Security

Cyber Security: What Boards Need to Know

Maintaining firewalls, protecting servers and filtering malicious emails rarely make...

The IA’S Principles Of Remuneration 2024 2025

This guidance from the Investment Association is aimed at assisting remuneration...
Diligent 2024 leadership tech cover

Leadership, decision-making & the role of technology: Business survey 2024

This research report by Board Agenda and Diligent sheds light on how board directors...

Director Reference Guide: Navigating Conflict in the Boardroom

The 'Director Reference Guide' on navigating conflict in the boardroom provides practical...
Nasdaq 2024 governance report cover

Nasdaq 2024 Global Governance Pulse

This Nasdaq survey gathered data from more than 870 board members, executives, and...

Becoming a non-executive director (4th edition)

Board composition is the subject of much debate, while the role of the non-executive...
art & science brainloop new cover

The Art & Science of Creating an Effective Board

Boards are coming under more scrutiny and pressure than ever before from regulators,...
SAA First time NED guide

First Time Guide for Non-Executive Directors

The role of the non-executive director has never been more vital: to advise, support,...

Register Free

Stay in the know! Register to access the latest governance news; plus receive updates about our events and podcasts. Register


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

Copyright © 2025 Questor Media Group Ltd.

  • Terms & Conditions
  • Privacy Policy
  • Sitemap