FRC Consults on Changes to Corporate Governance Code

The Financial Reporting Council is consulting on proposed amendments to the UK Corporate Governance Code. 

The Code applies to companies with a premium listing of equity shares. The proposed changes will ensure that such companies:

• put greater emphasis on ensuring remuneration policies are designed with the long-term success of the company in mind – this will be achieved by an amendment to Principle D.1; 
• put in place arrangements, when designing performance-related remuneration schemes that will enable them to claw back or withhold variable pay when appropriate to do so – this will be achieved by an amendment to Provision D.1;
• who receive a significant vote against a remuneration resolution will have to explain, when announcing the results of the AGM, what action they intend to take to understand the reason behind the result. The FRC’s intention is that companies should set out how they intend to go about engaging with shareholders in order to assess their concerns, rather than setting out how they intend to respond to those concerns (which could not realistically be done soon after the AGM); and
• are encouraged to give further consideration to the arrangements they have in place for deferred remuneration. 

The deadline for responding to the Consultation on Proposed Revisions to the UK Corporate Governance Code is 27 June 2014. The proposed changes, if implemented, will apply to financial years beginning on or after 1 October 2014.