All manner of organisations with an interest in a company secretary service will have also had reason to take note of the recent comments on the UK Corporate Governance Code by the Financial Reporting Council (FRC)’s Head of Communications, Peter Timberlake.
Call for a “fundamental review”
Observing that the Code was now a quarter of a century old and had “worked well to inspire confidence in UK businesses and instil trust among investors”, Timberlake nonetheless called for “a fundamental review of the Code to set it on a course for the next 25 years and to ensure it continues to attract goodwill and capital from across the globe, particularly as geopolitics and world economies look less certain.”
Timberlake added that while “much has happened to improve corporate behaviour and the accountability of Boards over the last quarter of a century and especially since the financial crisis”, “scandals” such as those engulfing Sports Direct and BHS still occurred.
As for why that was the case “if the Code is so marvellous”, Timberlake partly blamed the decision by some individuals “to play by different rules”. He explained that BHS, for example, was a private company and did not therefore have to obey the Code, while in the case of Sports Direct, its founder’s ownership of more than half the shares entitled them to “choose whether or not to worry about the niceties of the Code.”
“Build on the huge leaps forward of the last 25 years”
However, Timberlake asserted that corporate scandals remain “the exception rather than the rule”, while nonetheless urging business to “look way beyond the next dividend if people, families, communities and the UK economy as a whole are to enjoy genuine prosperity.”
He continued: “The evolution of corporate governance in the UK must build on the huge leaps forward of the last 25 years, follow the same core principles that have held the Code in good stead globally and avoid throwing any babies out with the bathwater.”
As a fundamental review of the Code by the FRC looms later this year, Timberlake suggested that companies should be required to report more effectively on how they have discharged their duty to consider the effects of their actions on a range of stakeholders such as employees, customers, suppliers and the environment.
Timberlake also argued in favour of additional monitoring of corporate governance reporting by the FRC, so that such reporting could be “tested and improvements made where necessary.”
Corporate governance should remain an uppermost priority
He concluded: “As Brexit looms, there will be many challenges to the UK as a natural home for business and capital, indeed the vultures are already circling. Maintaining the UK’s hard-won and enviable global reputation for high-quality corporate governance will be a critical factor in the nation’s future success for all its citizens.
“We all need UK businesses to thrive if society is to benefit through jobs, growth and prosperity. It’s the right time for a root and branch review of corporate governance to make sure it does the right job for the next 25 years, just as it has done in its first quarter of a century.”