Financial Reporting Council publishes New Guidance on Board Effectiveness
News types: Guidance, Publications
Published: 3 March 2011
FRC PN 323
The Financial Reporting Council (FRC) has today published new guidance to encourage the boards of listed companies to consider how they can lead their companies most effectively.
‘Guidance on Board Effectiveness’ is one of a series of guidance notes issued by the Financial Reporting Council to assist companies in applying the principles of the UK Corporate Governance Code. It reflects the changes that were made to the Code in 2010, such as the greater emphasis placed on the role of the chairman and the importance of getting the right balance on the board.
The guidance relates to the sections of the Code that deal with leadership and the effectiveness of the board, and addresses issues such as: the roles of the chairman, senior independent director, other directors and the company secretary; decision-making policies and processes; board composition and succession planning; and evaluating the performance of the board and directors.
Announcing the new guidance, FRC Chairman Baroness Hogg said:
‘Guidance on Board Effectiveness’ is one of a series of guidance notes issued by the Financial Reporting Council to assist companies in applying the principles of the UK Corporate Governance Code. It reflects the changes that were made to the Code in 2010, such as the greater emphasis placed on the role of the chairman and the importance of getting the right balance on the board.
The guidance relates to the sections of the Code that deal with leadership and the effectiveness of the board, and addresses issues such as: the roles of the chairman, senior independent director, other directors and the company secretary; decision-making policies and processes; board composition and succession planning; and evaluating the performance of the board and directors.
Announcing the new guidance, FRC Chairman Baroness Hogg said:
“This is a response to requests for continuing guidance on some of the issues raised by the UK Corporate Governance Code, and I am very grateful to the Institute of Chartered Secretaries and Administrators, and the steering group it established under the chairmanship of Sir John Egan, for consulting on and developing these thoughts on the FRC’s behalf. While it is not prescriptive, this guidance can, I hope, help boards to carry out their role effectively.”
The new guidance replaces ‘Good Practice Suggestions from the Higgs Report’ (known as the Higgs Guidance), which has been withdrawn.
Notes to Editors
- The Financial Reporting Council is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.
- The UK Corporate Governance Code sets out standards of good practice including on board composition and development, remuneration, accountability, audit and relations with shareholders. All companies with a Premium Listing of equity shares are required under the Listing Rules to report on how they have applied the Code in their annual report and accounts, and either to confirm that they have complied with the Code's provisions or - where they have not - to provide an explanation (known as “comply or explain”). The Code was revised in 2010, and applies to financial years beginning after 28 June 2010.
- The Code and the new FRC Guidance on Board Effectiveness can be found at: http://www.frc.org.uk/corporate/ukcgcode.cfm.
- The Institute of Chartered Secretaries and Administrators (ICSA) was commissioned by the FRC to develop the new guidance on its behalf. Details of the consultation process that ICSA carried out can be found at: www.icsa.org.uk/policy-guidance/consultations/improving-board-effectiveness.
Document created under a former FRC operating body.