New corporate governance code tackles risk and diversity
by Gill Montia
The Financial Reporting Council (FRC) has introduced changes to the UK Corporate Governance Code, having considered the lessons of the credit crisis.
Changes include a clearer statement of a board’s responsibilities relating to risk and a greater emphasis on the importance of getting the right mix of skills and experience on a board.
Measures to improve risk management include aligning performance-related pay to the long-term interests of the company and its risk policy and systems.
To promote proper debate in the boardroom, there are new principles on the leadership of the chairman, the responsibility of the non-executive directors to provide constructive challenge, and the time commitment expected of all directors.
Boards are also being encouraged to be well balanced and avoid “group think” by appointing members on merit and with due regard for the benefits of diversity, including gender diversity.
The new edition of the code will apply to financial years beginning on or after 29th June 2010 and companies are required either to follow the code or explain how else they are acting to promote good governance.