FRC comments on Business, Energy and Industrial Strategy Committee report on Corporate Governance
05 April 2017
In its considered and far-reaching report the Committee recognises the important role of the Financial Reporting Council (FRC) in policing corporate behaviour and supports our call for more powers to be able to hold directors to account for their responsibilities under Section 172 of the Companies Act. The Committee’s proposals pick up many of the FRC’s recommendations to help restore trust in business.
The depth and breadth of the recommendations, if fully adopted, will have significant implications for the FRC’s remit, resources and funding.
The UK’s framework for corporate governance is respected worldwide and an important factor in attracting investment to support businesses which provide jobs, growth and prosperity. The report acknowledges, as did the FRC in its evidence, the need for the system to evolve with changing circumstances.
The Code is now 25 years old and the FRC has committed to a fundamental review of the Code later this year to simplify and shorten it and set it on its course for the next 25 years.
We agree that the ‘comply or explain’ principle has worked well, not only reflecting the diversity of business models in the UK but enabling the FRC to implement measures that would not have been possible under a harder rules-based system.
In undertaking its consultation, the FRC will take account of the BEIS Committee’s recommendations and the Government’s response, and assess their implications on the FRC’s remit, resources and funding model.