Corporate Governance

Corporate governance is the system by which companies are directed and controlled.  It deals largely with the relationship between the constituent parts of a company - the directors, the board (and its sub-committees) and the shareholders.

Transparency and accountability are the most important elements of good corporate governance.  This includes:

  • the timely provision by companies of good quality information;
  • a clear and credible company decision-making process;
  • shareholders giving proper consideration to the information provided and making  considered judgements.

The corporate governance framework in the UK operates at a number of levels:

  • through legislation particularly the Companies Act;
  • through regulation and in particular for listed companies through the listing rules, which are the responsibility of the Financial Services Authority.
  • through the Combined Code which is the responsibility of the Financial Reporting Council. It contains general principles and more detailed provisions relating to the corporate governance of listed companies.  It is appended to the FSA's Listing Rules, which require these companies, in their annual report and accounts to, (i) report on how they apply the principles, and (ii) confirm that they comply with the Code's provisions or, where they do not, provide an explanation: hence the 'comply or explain' principle which, if applied effectively, underpins informed dialogue between directors and shareholders. contains general principles.

More information on the Combined Code can be found here.