Corporate Governance (overview)
Published: 4 October 2023
6 minute read
The 2018 Corporate Governance Code (the Code) was updated in January 2024 following a consultation which concentrated on a limited number of changes. The 2024 Code applies to financial years beginning on or after 1 January 2025. The 2018 Code remains in place until then. The 2024 Code is supported by revised guidance which was published on 29 January 2024.
Changes to the FCA Listing Rules
In July 2024, the Financial Conduct Authority (FCA) updated its Listing Rules, including the categories under which securities are listed on the Official List. As a result, there was a change in the companies required to follow the UK Corporate Governance Code. Previously, the Code applied to premium-listed companies. Going forward, companies which need to follow the Code include all those listed in the commercial companies category or the closed-ended investment funds category. For further information, please see the FCA consultation response.
The Importance of Corporate Governance
Corporate Governance is the system of rules, practices and processes that are put in place to manage and control a company. It is underpinned by the UK Corporate Governance Code.
Good corporate governance contributes to long-term company performance by helping to build an environment of trust, transparency and accountability. These values help businesses foster long-term investments, financial stability and business integrity.
Businesses with good corporate governance policies see stronger growth, and help contribute to more inclusive societies by ensuring the interests of all stakeholders are balanced.
The UK Corporate Governance Code
The UK Corporate Governance code (the Code) is an important part of UK company law and corporate governance framework. It applies to all companies listed on the London Stock Exchange in the commercial companies category.
The Code is maintained by the FRC and incorporates a set of Principles of good corporate governance. It is supported by a number of more specific Provisions and underpinned by the Financial Conduct Authority's Listing Rules.
The Listing Rules are given statutory authority under the Financial Services and Markets Act 2000. It is required that companies disclose how they have applied the Principles of the Code and complied with its Provisions, and they must explain if they have not complied with a Provision. The Code refers to this as 'comply or explain'.
History of the Corporate Governance Code
2024
UK Corporate Governance Code 2024
The revised UK Corporate Governance Code was published on 22 January 2024 and will apply to financial years beginning on or after 1 January 2025, other than provision 29 which will apply to financial years beginning on or after 1 January 2026.
Revised guidance to accompany the Code was published on 29 January 2024 in a new digital format.
2023
Corporate Governance Consultation
Following the consultation on Restoring Trust in Audit and Corporate Governance, in 2022, the government invited the FRC to strengthen the UK Corporate Governance Code in specific areas.
The key objectives were to improve the quality of companies' risk management and internal controls, and board's consideration of corporate governance activity to acheive their company's strategic objectives. We consulted on several other changes to the Code aimed at removing duplication and strengthening or streamlining reporting.
For more information review our Corporate Governance Consultation
2018
Comprehensive Code Review
The revision of the Code took account of work done by the FRC on corporate culture and succession planning, and the issues raised in the Government’s Green Paper and the BEIS Select Committee inquiry.
Apart from giving centre stage to corporate culture and purpose, the 2018 Code Review broadened the definition of governance and emphasised the importance of positive relationships between Shareholders and Stakeholders. It also stressed the significance of independence and constructive challenge in the boardroom.
2016
Audit Updates
Following the introduction of the EU Audit Directive and the Regulation, the Code was amended to ensure that it worked alongside the new legislation.
2014
Risk & Viability
The Guidance on Risk Management, Internal Control and Related Financial and Business Reporting was primarily directed at companies subject to the UK Corporate Governance Code.
The purpose of the guidance was to bring together elements of best practice for risk management; prompt boards to consider how to discharge their responsibilities in relation to the existing and emerging principal risks; and highlight related reporting responsibilities.
2010
The UK Corporate Governance Code
The 2003 update to the Combined Code to include the recommendations of the Higgs Report and the Smith Report was followed by the 2010 review.
In the wake of financial crises that came to a head in 2008-09, the FRC decided to bring forward the review and the Code was renamed the UK Corporate Governance Code. The review concluded, among other things, that more attention needed to be paid to following the spirit of the Code as well as its letter.
2005
Revised Turnbull Guidance
The Turnbull Review Group concluded that the original Turnbull Guidance contributed to an overall improvement to the standard of risk management and internal control, and therefore no significant edits were required.
A small number of amendments were proposed, among them requiring the inclusion in annual reports of information to allow shareholders to understand the principal features of a company's internal control procedures and risk management system.
2003
Smith Report
The FRC Group on Audit Committees, chaired by Sir Robert Smith, was tasked with developing the guidance on audit committees in the Combined Code. The group's report codified the role of audit committees. It was subsequently revised and is now known as the Guidance on Audit Committees.
Higgs Review
The Higgs review, conducted by Derek Higgs, was an independent review of the role and effectiveness of non-executive directors and the audit committee. It aimed to improve and strengthen the Combined Code.
While the review backed the existing non-prescriptive approach to corporate governance ( ‘comply or explain’) it also advocated for more provisions with set criteria for the board composition and evaluation of independent directors. This guidance has now been replaced by the Guidance on Board Effectiveness.
1999
Turnbull Report
The report, written by the committee chaired by Nigel Turnbull, set out obligations for directors under the Combined Code. The guidance on good practice for listed companies included keeping good internal controls, or having good audits and checks to ensure the quality of financial reporting and catch any fraud before it becomes a problem.
1998
Hampel Report
The Hampel Committee, chaired by Sir Ronnie Hampel, was set up to review the implementation of the Cadbury and Greenbury reports.
The Hampel Report aimed to harmonise, clarify and combine the two sets of recommendations into one Code. It relied on broad principles and a 'common sense' approach, which was necessary to apply to different situations, rather than Cadbury and Greenbury's perceived 'box-ticking' approach.
1995
Greenbury Report
The Greenbury Report was published in response to public and shareholder concerns about Directors' remuneration.
The Report was published by the Study Group on Directors' remuneration under the chairmanship of Sir Richard Greenbury. It included Principles of best practice, which encouraged greater visibility of remuneration structures and attached KPIs and the time horizons over which pay is released.
1992
Cadbury Report
The Committee on the Financial Aspects of Corporate Governance, chaired by Sir Adrian Cadbury, developed a set of principles of good corporate governance. These principles were incorporated into the London Stock Exchange's Listing Rules and introduced the principle of 'comply or explain'.
The Cadbury Code was the first Corporate Governance Code in the world. The recommendations focused on the control and reporting functions of boards, and the role of auditors.
Links to the Stewardship Code
The UK Stewardship Code sets high stewardship standards for asset owners and asset managers, and for service providers that support them. It provides the framework for signatories to demonstrate how they are meeting their clients’ and beneficiaries’ needs, and their own commitments, by providing evidence on the activities and outcomes of their stewardship.
The Stewardship Code works in tandem with the UK Corporate Governance Code to underpin high-quality reporting and accountability for investment and governance. Good governance and good stewardship should go hand in hand.
Information about the Stewardship Code and how to become a signatory
Corporate Governance Publications
| Name | AGM Guidance |
|---|---|
| Publication date | 21 July 2022 |
| Type | Guidance |
| Format | PDF, 582.2 KB |
| Name | Guidance on Board Effectiveness |
| Publication date | 16 July 2018 |
| Type | Guidance |
| Format | PDF, 412.3 KB |
| Name | Best Practice guide to Audit Tendering |
| Publication date | 7 February 2017 |
| Type | Guidance |
| Format | PDF, 312.0 KB |
| Name | Guidance on Audit Committees |
| Publication date | 17 June 2016 |
| Type | Guidance |
| Format | PDF, 447.1 KB |
| Name | Risk Management, Internal Control and Related Financial and Business Reporting |
| Publication date | 17 September 2014 |
| Type | Guidance |
| Format | PDF, 496.0 KB |
| Name | Review of Corporate Governance Reporting 2023 |
|---|---|
| Publication date | 16 November 2023 |
| Type | Report |
| Format | PDF, 3.1 MB |
| Name | Review of Corporate Governance Reporting 2022 |
| Publication date | 3 November 2022 |
| Type | Report |
| Format | PDF, 7.2 MB |
| Name | Review of Corporate Governance Reporting 2021 |
| Publication date | 25 November 2021 |
| Type | Report |
| Format | PDF, 6.2 MB |
| Name | Review of Corporate Governance Reporting 2020 |
| Publication date | 26 November 2020 |
| Type | Report |
| Format | PDF, 1.4 MB |
| Name | Review of Corporate Governance Reporting 2019 |
| Publication date | 9 January 2020 |
| Type | Report |
| Format | PDF, 486.8 KB |
| Name | Annual Review of Corporate Governance and Reporting 2017/2018 |
| Publication date | 24 October 2018 |
| Format | PDF, 867.9 KB |
| Name | The influence of proxy advisors and ESG rating agencies on the actions and reporting of FTSE 350 com |
|---|---|
| Publication date | 15 June 2023 |
| Type | Report |
| Format | PDF, 3.4 MB |
| Name | Annex 1 - Questionnaires |
| Publication date | 23 June 2023 |
| Format | PDF, 492.5 KB |
| Name | Annex 2 - Interview Guides and List of Interviewees |
| Publication date | 23 June 2023 |
| Format | PDF, 586.7 KB |
| Name | FRC Modern Slavery Reporting Practices in the UK 2022 |
| Publication date | 25 April 2022 |
| Type | Report |
| Format | PDF, 4.0 MB |
| Name | The Wates Corporate Governance Principles for Large Private Companies (February 2022) |
| Publication date | 23 February 2022 |
| Type | Report |
| Format | PDF, 2.8 MB |
| Name | Creating positive culture – opportunities and challenges |
| Publication date | 9 December 2021 |
| Type | Report |
| Format | PDF, 3.1 MB |
| Name | FRC Board Diversity and Effectiveness in FTSE 350 Companies |
| Publication date | 20 July 2021 |
| Type | Report |
| Format | PDF, 12.0 MB |
| Name | FRC Workforce Engagement Report |
| Publication date | 24 May 2021 |
| Type | Report |
| Format | PDF, 2.2 MB |
| Name | Changes in Remuneration Reporting Following the UK Corporate Governance Code 2018 |
| Publication date | 12 May 2021 |
| Type | Report |
| Format | PDF, 1.4 MB |
| Name | Improving the Quality of Comply or Explain Reporting |
| Publication date | 26 February 2021 |
| Type | Report |
| Format | PDF, 1.4 MB |
| Name | FRC Climate Thematic – Governance |
| Publication date | 10 November 2020 |
| Type | Report |
| Format | PDF, 1.0 MB |
| Name | AGM best practice guidance |
| Publication date | 6 October 2020 |
| Type | Guidance |
| Format | PDF, 328.1 KB |