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 2006;
- through the Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules which are made and enforced by the Financial Services Authority as the UK Listing Authority;
- through the UK Corporate Governance Code and the UK Stewardship Code for institutional shareholders, which is the responsibility of the Financial Reporting Council;
- through the Takeover Code, which is issued and administered by the Takeover Panel.
What's New?
The Kay Review of UK equity markets and long-term decision making
The Secretary of State for Business, Innovation and Skills, Vince Cable, announced on 22 June 2011 that Professor John Kay had been asked to examine investment in UK equity markets and its impact on the long-term performance and governance of UK quoted companies.
The review follows on from the Department’s call for evidence ‘A long-term focus for corporate Britain’ launched in October 2010, which explored issues of economic short-termism in the UK, and a number of broader corporate governance issues surrounding takeovers and executive pay. A summary of responses to this call for evidence was published in March 2011. The responses to the call for evidence found that there was evidence of short-termism in UK equity markets and of some agency problems in the investment chain. It was these findings which prompted the Kay Review.
On 15 September 2011, Professor Kay launched the Kay Review’s call for evidence at the National Association of Pension Funds (NAPF), where he outlined his philosophy and objectives for the review. The call for evidence paper built on the previously published terms of reference, and set out a range of issues and questions on which we sought evidence.
Following this, on 29 February 2012 Professor John Kay published the Interim Report of his independent review. The Interim Report summarises the responses to the review’s call for evidence and presents a broad discussion of the issues raised.
All information relating to the Kay Review can be found at the Kay Review page, which includes the reviews call for evidence document, the summary of responses to the call for evidence and the Kay Review Interim Report.
Executive remuneration discussion paper
This discussion paper looks at the issues surrounding executive remuneration. It builds on the evidence received in response to A long-term focus for corporate Britain (PDF, 447 Kb) , the existing body of research and conversations with business, shareholders and other stakeholders. The discussion paper can be found at the following:Executive remuneration discussion paper it closes on 25 November 2011
Responses should be sent to: executivepaydiscussionpaper@bis.gsi.gov.uk or you can write to
Executive Pay Discussion Paper
Business Environment
Department for Business, Innovation and Skills
1 Victoria Street
London
SW1H 0ET
Simpler reporting for the smallest businesses: discussion paper
Proposals to simplify the financial and corporate reporting requirements for the smallest businesses are the subject of a discussion paper published 25 August 2011 by the Department of Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC).
Simpler reporting for the smallest businesses: discussion paper (PDF, 125 Kb) sets out ideas to reduce the amount of reporting micro-entities would be required to undertake. This could benefit around million businesses and result in considerable cost savings in relation to preparation of their accounts.
The paper is not intended as a statement of Government policy. It has been developed to stimulate discussion and gather evidence before the Government decides to take forward any further action in this area. The period for submitting responses has closed and are currently being reviewed.
Footnote: The attached (PDF, 15 Kb) corrigendum should be applied to all earlier versions of this document, printed prior to 23 September 2011.
European Commission Green Paper on 'The EU Corporate Governance Framework'
On 5th April 2011 the European Commission published its Green Paper on 'The EU Corporate Governance Framework'. Details of the consultation and Green Paper can be found at the Commission website. BIS contacted stakeholders and interested parties in order to inform the government response, which was published 22 July 2011.
Women on Boards
The Lord Davies independent review into Women on Boards was published on 24 February 2011. Further information including the review itself and press release can be found on the Women on Boards page.
A Long -Term Focus for Corporate Britain - call for evidence
On 25th October 2010 the Secretary of State for Business Vince Cable launched the first stage of a review into corporate governance and economic short-termism by issuing a call for evidence.
The document and further information can be found at http://www.bis.gov.uk/Consultations and http://www.official-documents.gov.uk/document/cm79/7915/7915.asp
The consultation has now closed. The Government will publish the next steps of its wider review of corporate governance in the summer.
