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The Chief Secretary to the Treasury and the Minister for the Cabinet Office today published a new Code for corporate governance which will apply to central government departments and will help enhance their transparency and accountability.

The Code draws on best practice in the public, private and charity sectors, such as the UK Corporate Governance Code issued by the Financial Reporting Council. It incorporates findings from a comprehensive review into corporate governance in central government departments and replaces the previous version published in 2005. This new Code will reinforce the importance of good governance as a pre-requisite for achieving good financial management.

The most significant changes in the Code are:

• Providing for greater ministerial involvement in departmental business, with the Secretary of State chairing board meetings. This change aims to help ministers engage with their departments and enable them to lead their departments effectively. The established accountability of ministers and permanent secretaries to parliament remains unchanged.
• Around a third of board members will be non-executives from outside government, primarily from the private commercial sector and with experience of managing large, complex organisations. It is expected that their knowledge and experience of good financial and risk management will play a significant role in enhancing scrutiny by, and accountability to, the board.

Even among the larger government departments, one size cannot fit all. The Code therefore provides for a ‘comply or explain’ approach, whereby the department can depart from the Code’s provisions provided the reasons are explained in its annual governance statement accompanying the department’s accounts.

In welcoming the new Code the Chief Secretary to the Treasury, Danny Alexander, said:

“Effective corporate governance is essential to any well run organisation. This Government is committed to applying the highest standards and this new Code is a further important step in the Government’s drive to increasing transparency and accountability in the use of public money.”

Minister for the Cabinet Office, Francis Maude said:

“The Corporate Governance Code published today sets out the role of the Government Non-Executives, and how they will provide challenge and support to ministers and officials through Enhanced Departmental Boards.
“The appointment of experienced leaders from across the private, public and not-for-profit sectors as Government Non-Executives is an important step in the government’s reform agenda and they are already working with ministers and officials to help ensure central government is operating as efficiently and effectively as possible.”

Lord Browne, the Government Lead Non-Executive Board Member, said:

“Good corporate governance is essential to effective organisations. The Corporate Governance Code draws on commercial best practice to set out clear roles for Departmental Boards and their Members. It also recognises that a one-size-fits-all approach to complex organisations does not work – through a ‘comply-or-explain’ approach, it allows Departments room to implement good corporate governance in a way which makes sense for them.”

The principles in the Code apply across government and non-ministerial departments and arm’s length bodies can adapt the detailed provisions to suit their own circumstances.

Notes for Editors

1. The Code is available at http://www.hm- treasury.gov.uk/psr_governance_corporate.htm.
2. The Code builds on efforts to make Whitehall operate in a more businesslike manner, including the announcement in December 2010 of the appointment of Non-Executive Board Members to Whitehall boards.

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