FRC Annual Review highlights the value of meaningful explanations in corporate governance reporting and the code’s flexibility
News types: Publications
Published: 13 November 2025
The Financial Reporting Council (FRC) has today published its Annual Review of Corporate Governance Reporting, analysing reporting trends and practices among 100 UK-listed companies against the 2018 UK Corporate Governance Code for the last time. Going forward Annual reports will be reviewed against the updated 2024 Code which came into effect in January.
A key finding shows that companies reporting departures from Code provisions are increasingly providing clear, meaningful and context-specific explanations for their approach. The review highlights that this flexibility is a core strength of the Code, enabling companies to tailor their governance arrangements to their individual circumstances whilst maintaining transparency and confidence.
The analysis found 25 companies disclosed a departure from at least one Code provision, with the most common relating to audit committee composition, chair independence and tenure. Many organisations demonstrated good practice by providing comprehensive explanations that outlined their rationale and described alternative governance arrangements in place.
The review also highlights examples of good practice, with companies continuing to provide high-level commentary supported by clear signposting to relevant sections of their annual reports. This approach enables companies to communicate their governance practices effectively without adding unnecessary length to their disclosures.
Mark Babington, Executive Director of Regulatory Standards at the FRC"The UK Corporate Governance Code's flexibility is one of its greatest strengths. Companies have never been expected to follow a one-size-fits-all approach. Where organisations determine that departing from a specific provision better reflects their circumstances, clear and meaningful explanations are just as valid as compliance – and in many cases, more insightful to investors and other stakeholders.
"We encourage all companies to embrace this flexibility and to view explanations not as a lesser option, but as an opportunity to demonstrate how their governance approach genuinely serves their business and their stakeholders."
The review also examined preparations for the implementation of the new Provision 29 on risk management and internal controls in the new Corporate Governance Code 2024, which comes into force for financial years starting on or after 1 January 2026. More than half of the companies in the sample mentioned the new provision, with many providing details on their preparation activities.
The FRC has published a series of podcasts to support companies in strengthening their reporting across areas covered by the Code and will be holding a webinar on 20 November to discuss the reviews findings in detail.
The FRC recently updated its Corporate Governance Code Guidance to clarify how the Code's principles offer companies flexibility in structuring remuneration for non-executive directors. Kate O'Neill discussed how the change clarifies the flexibility on remuneration in the Code with Jessica Dahlstrom, Head of Corporate Governance and Kelvin Ernest, Senior Corporate Governance Policy Associate, in the FRC's latest In Conversation podcast episode.