The Financial Reporting Council today announced a review of the impact of the Combined Code on Corporate Governance, which sets out best practice corporate governance standards for UK listed companies.

Speaking at the Institute of Chartered Secretaries and Administrators’ (ICSA) Corporate Governance Conference Sir Christopher Hogg, Chairman of the Financial Reporting Council, said:

“While there is no assumption that the Code is fundamentally flawed or that a different regulatory framework for corporate governance could have alleviated the financial crisis, we are clear that the time is now ripe for testing the Code’s content and application against the fresh thinking that the crisis must provoke.

The FRC will liaise closely with Sir David Walker’s review of the governance of banks and share relevant research and information.”

The FRC is inviting views on any aspect of the Code, but in particular on:

• The composition and effectiveness of the board as a whole;
• The respective roles of the chairman, the executive leadership of the company and the non-executive directors;
• The board’s role in relation to risk management;
• The role of the remuneration committee;
• The quality of support and information available to the board and its committees;
• The content and effectiveness of Section 2 of the Code, which is addressed to institutional shareholders.

The FRC is also seeking views on how the operation of the ‘comply or explain’ mechanism could be improved. It requires boards to provide investors with the necessary information on which to make that judgement, and a sufficient number of investors to engage constructively with the companies in which they invest through dialogue and the use of their voting and other rights.

Views are sought from listed companies, directors, investors and other interested parties by 29 May 2009.

The FRC will publish its findings before the end of 2009. If any changes are proposed to the Combined Code or the way in which it operates they will be subject to further consultation.

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance.
2. The FRC’s functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
3. The Combined Code on Corporate Governance sets out standards of good practice in relation to issues such as board composition and development, remuneration, accountability and audit and relations with shareholders. All companies incorporated in the UK and listed on the Main Market of the London Stock Exchange are required under the Listing Rules to report on how they have applied the Combined 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”). Since taking formal responsibility for the Combined Code in 2003 the FRC has carried out two previous reviews of its effectiveness, both of which led to a small number of revisions being made.
4. Copies of the consultation paper and the Combined Code can be found at http://www.frc.org.uk/corporate/reviewCombined.cfm. Responses to the consultation paper are requested by 29 May 2009 and should be sent to: codereview@frc.org.uk.
5. Press enquiries should be directed to Chris Hodge, telephone 020 7492 2381, email: c.hodge@frc.org.uk.