18 Sep 2023
The Institute of Directors (IoD) has responded to changes to the UK Corporate Governance Code submitted for consultation by the Financial Reporting Council (FRC).
The business group stated that it is a 'strong advocate' of a principles-based approach to corporate governance regulation. It said that it does not believe the Code is deterring companies from listing in the UK, but flexibility in the Code could be harnessed by the FRC.
Additionally, the IoD stressed that the Code should avoid a 'tick box' approach to assessing standards of governance, and not be too prescriptive about how boards organise their activities.
'The effectiveness of the UK's?'comply or explain' approach to governance is dependent on the willingness of investors and other stakeholders to thoughtfully consider possible deviations from the Code,' said Roger Barker, Director of Policy and Governance at the IoD.
'If businesses feel that they must comply, then the Code risks becoming seen as a regulatory 'burden' rather than a repository of good governance practices.
'It is also important that the Code does not become too prescriptive about how boards should organise their activities. If too much of the board's agenda is imposed upon it by regulators and other external actors, then lines of accountability will be blurred, and the board's role will be reduced to that of a glorified compliance function.'
The IoD's full response to the FRC's consultation can be found here.