Improvements in Corporate Governance reporting but many still falling short
News types: Corporate Reports, Generic Announcement, Publications
Published: 3 November 2022
The Financial Reporting Council today published its Annual Review of Corporate Governance Reporting which found an improvement in the quality of reporting against the UK Corporate Governance Code.
FRC has seen year-on-year improvements in reporting, and importantly more companies are disclosing the areas within the Code that they have chosen to explain rather than comply. However, the report also found that too few companies are providing meaningful explanations.
A common theme throughout the report is the lack of disclosure in relation to the outcomes and impacts of governance policies and practices. Companies need to demonstrate, within their reporting how their governance has been improved.
The FRC was also disappointed to see minimal disclosure about board engagement with major shareholders - with some companies simply stating that there had been meetings without providing further information on their engagement and its outcome. Such explanations are important to give investors and the public information which is critical for market confidence and lowering the cost of capital.
The assessment, which comprised 100 randomly chosen FTSE 350 and Small Cap companies, supports the FRC’s growing body of evidence on those areas where companies report well and where improvements could be made. That evidence will help inform the work of the FRC as it consults on revisions to the Corporate Governance Code next year.
The FRC’s CEO, Sir Jon Thompson, said:
“In uncertain economic times, how companies govern themselves is more important than ever. The UK Corporate Governance Code continues to provide a clear and flexible basis to support better governance and well-run companies.”
This year, we have continued to see a good standard of reporting but companies still need to go further in reporting how they apply the Code’s principles and comply with the provisions, describing the actions and outcomes that come from them to improve market confidence and facilitate better stewardship.”
David Styles, Director of Corporate Governance and Stewardship and Maureen Beresford, Head of Corporate Governance explore the key themes of this year’s review in this podcast.