WIREDGOV

The Financial Reporting Council has announced that it will consult on whether to amend the UK Corporate Governance Code to address a number of issues relating to executive remuneration. The consultation will be carried out after the Government’s legislation on voting and reporting on executive remuneration has been finalised.

The FRC will consult on two proposals that the Government has asked it to consider: to extend the Code’s existing provisions on claw-back arrangements, and to limit the practice of executive directors sitting on the remuneration committees of other companies. It will also seek views on whether companies should engage with shareholders and report to the market in the event that they fail to obtain at least a substantial majority in support of a resolution on remuneration.

Announcing the decision to consult, FRC Chairman Baroness Hogg commented:

“The FRC will reflect on the case for changes to the Code once the legal requirements on companies are clear. We will undertake a full consultation, and there is no presumption on the FRC’s part as to the outcome of that consultation. All interested parties will have an opportunity to make their views known before we reach a final decision, which will also take into account any developments in company and shareholder practice, including the use made by shareholders of their right annually to vote on the election of directors.”

The FRC is currently consulting on changes to the UK Corporate Governance Code which would require FTSE 350 companies to put the external audit contract out to tender at least every ten years and encourage more meaningful reporting by audit committees. If implemented these changes would come into effect in October 2012. Any further changes following the consultation on remuneration issues would be incorporated into the next edition of the Code, which is normally updated every two years.

1. The Financial Reporting Council is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.
    
2. Under the UKLA’s Listing Rules, all companies with a Premium Listing of equity shares are legally required to report on whether they have complied with the provisions of the UK Corporate Governance Code and, if not, explain to shareholders the reasons why they have not done so.
    
3. Media enquiries should be directed to Oliver Parry, Acting Head of Communications on 0207 492 2397 or at o.parry@frc.org.uk.