The UK Governance Code updates and what they mean

UK governance code updates were announced this week by the Financial Reporting Council (FRC), following months of consultation and feedback from stakeholders – some of whom were convinced that proposed reforms were a step too far. 

Now, most of those proposals appear off the table, and the argument to protect Britain’s competitive economy has won out. 

The resulting change is minimal for directors and other corporate leaders, at least for now.

The main change to the UK’s Corporate Governance Code – the short but well-known bible of principles for directors in Britain –  concerns a company’s risk management and internal controls frameworks. 

The updated code now requires the board to take a stronger role in overseeing these areas – reviewing their effectiveness at least once a year. 

Other changes aim to simplify the language and ensure clear and concise expectations; this mainly relates to malus and clawback and audit committee standards.

They are primarily concerned with reporting on ESG measures like social impact, diversity and inclusion, overboarding, and shareholder engagement.

It will likely delight the vast majority of board members, who in 2023 faced the prospect of more responsibilities from a revamped code. At the time, many criticised the proposed rule changes as an unnecessary burden that would stifle the country’s competitive edge.

The code revamp is minimal, so it’s a “business as usual” approach with only minor changes in the near future.

It’s the critical question – especially since the UK’s corporate governance code is already a short document based on the flexible “comply or explain” principle and is much less intrusive than other governance regulations worldwide. 

The main conclusion is that the UK remains committed to the principle that any corporate governance code should keep things streamlined and not burden businesses with bureaucracy. 

This approach will likely always be up for debate – depending mainly on the policies of whatever government is in power – but it stays relatively unchanged for now. 

You can read more about it here.