2018 UK Corporate Governance Code

On 16th July 2018, the Financial Reporting Council (FRC) published the 2018 UK Corporate Governance Code (the Code). This follows a consultation on a draft that was published in December 2017. The new Code will apply to accounting periods beginning on or after 1st January 2019. If you would like to discuss how the changes could impact your business, please contact me at jp@jpnoel.co.uk

To summarise the key changes:

·         Employee engagement. 3 main methods are referenced for engagement with the workforce, namely a director appointed from the workforce, a formal workforce advisory panel, or  a designated non-executive director. “If the board has not chosen one or more of the three methods, it should explain what alternative arrangements are in place and why it considers that they are effective”.

·         A focus on the long-term. “Remuneration schemes should promote long-term shareholdings by executive directors that support alignment with long-term shareholder interests. Share awards granted for this purpose should be released for sale on a phased basis and be subject to a total vesting and holding period of fiver years or more”.

More effective narrative. “Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Executive remuneration should be aligned to company purpose and values, and be clearly linked to the successful delivery of the company’s long-term strategy”.

Risk reporting. “Remuneration arrangements should ensure reputational and other risks from excessive rewards, and behavioural risks that can arise from target-based incentive plans are identified and mitigated”.

Committee remit. “The board should ensure that workforce policies and practices are consistent with the company’s values and support its long-term sustainable success. The workforce should be able to raise any matters of concern”.

More detail on the new Code can be found at www.frc.org.uk.