FRC: next steps for corporate governance

January 4, 2012

The Financial Reporting Council has published its first annual review on how the UK Corporate Governance Code and the Stewardship Code, introduced in 2010, are being implemented, and has also outlined its plans to consult in 2012 on amendments to both Codes and related FRC guidance.

UK Corporate Governance Code

The FRC reviewed 60 corporate governance statements over the past year and noted the high take up of new Code provisions, such as annual election of directors and use of external advisers to conduct board evaluations. It was also pleased to see that many chairmen made a personal statement in the annual report and that many committee chairmen adopted the same approach for the report on their committees.

However, the FRC expresses concerns about the following:

  • The explanations provided by some companies that do not comply with the UK Corporate Governance Code. Whilst the majority provide good explanations, a minority do not and occasionally provide no explanation at all. The FRC is currently holding discussions with companies and investors to identify common criteria that companies can refer to when preparing their comply or explain statements.
  • Business model, strategy and risk. Whilst recognising improvements by companies when disclosing principal risks and uncertainties in their business reviews, the FRC considers that more effort is needed in relation to risk and how it is mitigated and managed. It stresses that companies should focus on strategic risks and the major operational risks inherent in their business models and strategies, rather than general risks applicable to all companies.
  • Reporting by audit committees. The FRC notes that very few audit committees report key decisions taken or judgments made and limit themselves to repeating their terms of reference. In the FRC’s view, their reports are “unenlightening” and this threatens to undermine confidence at a time when there is “considerable scepticism about the effectiveness of audit and audit committees”.
  • Reporting by remuneration committees. Similar criticisms can be made of remuneration committees. Companies need to be more transparent about the link between remuneration policy and strategy and its approach to risk in the current climate.

UK Stewardship Code

The FRC notes that over 230 asset managers, owners and service providers signed up to the Stewardship Code. The numbers exceeded the FRC’s expectations but it stresses that signing up to the Code is only a first step and that it is too early to tell if the objective of better engagement will be met. It notes that reporting on stewardship is variable, especially in relation to managing conflicts, collective engagement and the use of proxy voting agencies.

Next steps – FRC proposals for 2012

UK Corporate Governance Code: the FRC is expected to consult on the following amendments to the Code:

  • to extend the reports that the audit committee gives to the board and to require clearer disclosures of how the external auditor is selected;
  • to reflect any recommendations on going concern following Lord Sharman’s enquiry (expected to be published in February 2012); and
  • to tie in with proposals from BIS on narrative reporting (expected to be finalised in the first few months of 2012).

These would be in addition to the recently reported changes to the Code requiring FTSE 350 companies to report annually on their diversity policy.  Any amendments to the Code will take effect on 1 October 2012 to tie in with proposals from BIS.


New Year Resolution: Do more for charity

January 4, 2012

Non-Executive Appointments & Charity Trustee Roles in the voluntary sector are a way of giving something back by using your corporate skills for the benefit of others.

If one of your New Year resolutions for 2012 is to do more for charity and you are looking for new and different ways to develop your skills, becoming a non-executive or trustee on a not-for-profit board, or charity could provide you with a unique opportunity.

More and more people with careers predominantly in the private sector are thinking about making a change, to do something different and are looking at public and voluntary sector roles. The not-for-profit or charity boards gain often much needed commercial expertise and the non-executives or trustees gain insights and knowledge from their involvement in the strategic and organisational development of an organisation.

These roles are generally unremunerated, though some do pay small fees and nearly all pay reasonable expenses – in most cases you will be giving much of your time for free and will be genuinely volunteering.

So, how do you go about getting a position with a not-for-profit or charity board?

The first step is to look around your network on LinkedIn or Facebook to see who else is doing this sort of work and contact them to find out more about what they are doing and to see if there are any vacancies coming up which may be of interest.

There are also a number of web-sites dedicated to filling these roles such as the following:

You might also want to identify local charities in your area – you can search the Charity Commission web-site below to get the contact details and then approach them directly


Competition for Non-Executive and Trustee positions in the public and voluntary sectors is fierce, however so it is wise to prepare yourself before making an application for a vacancy. Find out as much as you can about the organisation, what issues they are facing and who is already on the Board – often this information can be found on their web-sites.

It is also a good idea to talk to the Chair of the organisation informally if possible to see exactly what sort of skills they are looking for in a new NED or trustee.

There may also be other ways in which you can be involved with a charity as a volunteer which can lead to a Board position if you are not immediately successful with a NED or trustee application – the important thing is to get involved!

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