This process began with the Walker Review in 2009 and has culminated in the replacement of the Combined Code by the UK Corporate Governance Code. This Code is valid for years beginning on or after 29th June 2010.
The Code is a guide for effective Board practice and is based on the underlying principles of “accountability, transparency, probity and focus on the sustainable success of an entity over the longer term.”
The principle base philosophy has thankfully remained, thereby allowing for “comply or explain”. Many companies may not fall within the Code principles all the time or at all, but as stated in the Code “Such companies may nonetheless consider that it would be appropriate to adopt the approach in the Code and they are encouraged to do so.” You would need a good reason to ignore the Code.
The value of our “comply or explain” principle based system in comparison to the more “tick-box” systems seen in many other countries is that if you tick the boxes you are compliant and can now do anything else. The value of the principle based system is that the company is given the ownership of compliance and the proof thereof and as it is guideline based, companies tend to ensure that compliance for them is achieved which is always a better compliance than a generic list of conditions that are an attempt at “one size fits all”.
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