FRC Review of the Combined Code Endorsed by Business Leaders

15 December 2005

The Institute of Directors (IoD) said today it was pleased with the outcome of the Financial Reporting Committee's review of the implementation of the Combined Code on corporate governance.  Unless there were serious failings, now would be too early to make substantial changes to the Code, against which the majority of companies have only reported once, the IoD said.   Adding, that, while the Code has the great benefit of being able to respond to market needs, constant change was in nobody's best interest.

Patricia Peter, Head of Corporate Governance at the IoD, said:

"We particularly welcome the endorsement by both issuers and investors of the Code's 'comply or explain' approach as continuing to be a strong force in the improvement of UK corporate governance standards.  These are already world class and can now have the confidence to improve further while resisting undesirable legislative intervention from whatever source. Following the abolition of the statutory OFR we plan to work with the FRC and others to find an appropriate outcome to the future of narrative reporting."

The two matters which the FRC proposes to bring forward for amendment were welcomed by the IoD.  The exclusion of the chairman from the remuneration committee frequently had the unintended effect of reducing the effectiveness of that committee. While, identifying 'votes withheld', rather than abstentions, will enable clearer signals to be given and enable companies to judge where investors are making a considered decision, the IoD pointed out.