The new UK Corporate Governance Code released by FRC in May 2010 is applicable for organisation with financial years starting on or after 29th June 2010
The principles are contained in the following 5 key sections.
Below is summarised the guidelines to the sections, the principles contained in each section are listed in the supporting document.
Section A: Leadership
- The Board must be effective and collectively responsible for long-term success of the company.
- There should be clear division of responsibility between running the business and running the Board with powers of decision making controlled
- Chairman responsible for the leadership and effectiveness of the Board.
- It remains a unitary Board with non-executive Directors (NED’s) being required to constructively challenge and develop strategy.
Section B: Effectiveness
- The Board and the Board Committees should have the appropriate balance of the following to enable its ability to discharge duties and responsibilities effectively –
- Knowledge of the company
- Formal, rigorous and transparent procedure for appointment of new directors (see further news items on this topic)
- Directors should receive induction, receive appropriate information in a timely manner and should provide enough time to the company
- Formal and rigorous annual evaluations of –
- The Board’s performance
- The Board Committee’s performance
- Director’s performance
- All directors should be submitted for re-election at regular intervals
- FTSE 350 – annually
- Others – subject to continued satisfactory performance
- Board should present a balanced and understandable assessment of the company’s position and prospects
- Sound risk management and internal control systems to be maintained
- Board needs to determine the nature and extent of the significant risks it is willing to take to achieve strategic objectives
- Formal and transparent corporate reporting, risk management, control systems and relationship with external auditor
- Level should be enough to attract quality required by not overpay
- Executive director remuneration should be liked to corporate and individual performance
- Formal and transparent procedure on remuneration policy without input by Directors on their own remuneration
- This should include ensuring a mutual understanding of objectives
- Board is responsible for dialogue
- AGM to be used to communicate with investors and their participation should be encouraged
Section C: Accountability
Section D: Remuneration
Section E: Relations with Shareholders