UK-listed companies face tighter rules around executive pay, diversity and shareholder votes under a shake-up of the UK Corporate Governance Code.
The Financial Reporting Council released its proposed changes to the code today in response to a Government green paper released late last year.
The FRC says boards need to be more specific about actions when shareholders vote against resolutions, noting executive pay as an example. Remuneration committees should also have broader responsibility and discretion for ensuring policies align with strategic objectives.
The code also calls for appointments to be based merit and objective criteria to avoid group think. It also calls for better engagement with wider stakeholders and establishing the company’s purpose, strategy and values.
The UK takes a ‘comply or explain’ approach to the Corporate Governance Code, which applies to all companies with a premium listing.
FRC chairman Win Bischoff says the revisions have created a code that is “shorter and sharper and fit for purpose”.
“At this critical time and as the country approaches Brexit, a revised Code will be essential to restoring trust in business, attracting investment and ensuring the long-term success of companies for members and wider society.”
Bischoff adds that engaging with and contributing to wider society must not been seen as a tick-box exercise but imperative to building confidence among stakeholders and the long-term success of a company.
Business Minister Margot James says the changes build on the Government’s Industrial Strategy, which seeks to establish the UK as a world-leading business environment.
“Firms that are alive to the concerns of their workers and shareholders see the benefits on their bottom line and the Financial Reporting Council’s proposals will ensure our largest companies benefit more from the experience of their workforce, suppliers and customers.”