Essential Corporate News – Week ending November 26, 2021

FRC: Annual Review of Corporate Governance reporting

On November 24, 2021 the Financial Reporting Council (FRC) published its Annual Review of Corporate Governance Reporting. The review highlights areas of high-quality reporting, but notes that there is still room for further improvement in areas such as substantive disclosures on board appointments, succession planning, diversity and reporting on the effectiveness of internal control and risk management systems. In addition, greater clarity as to how a company is applying the principles in the 2018 UK Corporate Governance Code (Code) is needed,  as well as clearer explanations where there are departures from the Code so that shareholders and stakeholders have greater confidence of the quality of governance.

The review sets out the FRC’s expectations across the five areas of the Code. In each the FRC sets out its general conclusion, areas where reporting could be improved and examples of good practice along with expectations.

FRC’s reporting expectations

To support improved reporting the FRC has reiterated its expectations of 2020 and, where relevant, introduced new expectations to support findings of this year’s assessments. As a result it want to see the following:

• Greater attention to the alignment between reported good governance and company practices and policies, strategy and business models.
• Increased focus on assessing and monitoring culture by using different methods and metrics.
• Better reporting of succession planning, and how this links to assuring the make-up of the board and delivering diverse challenge. 
• Improved reporting on outcomes and actions, rather than declarations or statements of intent without detail. 
• Increased focus on assessing and ensuring the effectiveness of the risk management and internal control systems.
• Better explanation of how executive remuneration is aligned to a company’s purpose, values and strategy.