The Financial Reporting Council today announced that it intends to undertake a regular review of the Combined Code on Corporate Governance to ensure that it is working effectively and identify whether any amendments are needed.

The formal review process will be undertaken in the second half of 2005, by which time listed companies will have reported on their compliance with the revised Combined Code for the first time.  The FRC will commence discussions with companies and investors during 2004 to get views on how the Code is working, and there will be full consultation if any changes are proposed as a result of those discussions.

Announcing the planned review Sir Bryan Nicholson, chairman of the Financial Reporting Council, said:

“It is not in anybody’s interest to have a framework for corporate governance that is continually changing, and there should be no presumption that an annual review will lead to annual revisions to the Combined Code.  The new Code will take time to bed down and it is important that we have a period of stability.  However, if issues emerge or any clarification is needed, it is obviously desirable that there is some flexibility to make changes in an orderly and timely way.  A regular review will give us that opportunity, and will ensure that there is a regular dialogue with companies, investors and other stakeholders.”

 Sir Bryan added that the FRC would consult on a recommendation from Paul Myners that the Combined Code should be amended to require companies to include a ‘vote withheld’ box on proxy voting forms for resolutions at AGMs.  This recommendation was contained in his report to the Shareholder Voting Working Group, published in January 2004. 

1.                   The Financial Reporting Council (FRC) is a unified, independent regulator.  Its mission is to promote confidence in corporate reporting and governance.  The FRC incorporates five subsidiary boards: the Accounting Standards Board, the Auditing Practices Board, the Financial Reporting Review Panel, the Accountancy Discipline and Investigation Board and the Professional Oversight Board for Accountancy.

2.                   The revised Combined Code on Corporate Governance was published in July 2003, and applies for reporting years beginning on or after November 2003. Copies of the Combined Code can be downloaded from the FRC website: http://www.frc.org.uk/about/combined.cfm

3.                   Paul Myners produced a report to the Shareholder Voting Working Group on the impediments to voting shares in January 2004.  He recommended that “companies should provide a vote withheld box on proxy forms, whilst retaining the current legal position where only ‘for’ or ‘against’ votes are taken into account when deciding whether or not a resolution is carried. When declaring the results, companies should publish the total number of votes received, the votes ‘for’ and ‘against’ the resolution, and the number of votes consciously withheld”.

4.                   If this recommendation is accepted, this might require a change to provision D.2.1 of the Combined Code, which states that:

“The company should count all proxy votes and, except where a poll is called, should indicate the level of proxies lodged on each resolution, and the balance for and against the resolution and the number of abstentions, after it has been dealt with on a show of hands. The company should ensure that votes cast are properly received and recorded.”