FRC consultation on the UK Corporate Governance Code

The Financial Reporting Council (FRC) has launched a consultation on the UK Corporate Governance Code.  The main proposed changes deal with the need for a more robust framework of prudent and effective risk management and internal controls, providing a stronger base for reporting on and evidencing the control framework during the reporting period.

https://www.frc.org.uk/consultation-list/2023/corporate-governance-code-consultation

The focus areas of the consultation are as follows:

• Board leadership and company purpose – a new principle that the company should report on activities and outcomes when reporting on governance to demonstrate the impact of governance practices
• Division of responsibilities – increased focus and scrutiny on the number of board positions held by listed company directors, how the director has sufficient time to discharge their role effectively in light of such and explicit consideration within performance reviews of their ability to discharge responsibilities effectively
• Composition, succession and evaluation – requirements to describe the work of the nomination committee in promoting diversity and inclusion
• Audit, Risk and internal control – enhancing the responsibilities of the AC across a broader remit encompassing narrative reporting, ESG, as well as the new Minimum Standard. As well as increased focus on reporting on the assessment of the effectiveness of the internal control framework, with an expected update to the FRC “Guidance on Risk Management, Internal Control and Related Financial and Business Reporting” later in the year
• Remuneration - the revisions to this section of the Code are designed to strengthen the links between companies’ remuneration policies and corporate performance in the wider sense, including ESG objectives.

It is anticipated that the revised Code will apply to accounting periods commencing on or after 1 January 2025.