Governance

Compliance rising says latest governance review

Simon Lowe Simon Lowe

FTSE 350 corporate governance compliance increases to highest ever level but other key governance areas require greater progress.

Corporate scandals and escalating executive pay have eroded trust in business in recent years, and governance standards have been under increasing scrutiny by government, the media and the general public. Trust in markets underpins a vibrant economy, so in times of uncertainty it is more important than ever for businesses to prioritise improvements to their corporate governance.

Our 2017 review into governance practices in the FTSE 350 finds compliance higher than ever with 66% reporting full compliance with the UK Corporate Governance Code (the Code). This progress is not matched when it comes to other key areas of governance best practice, such as engagement, culture and diversity.

> Download the 2017 Corporate Governance Review: a question of trust (PDF)  [ 3137 kb ] for the full analysis.

The number of companies providing informative insight into shareholder engagement fell for the third year, with only 33% of companies discussing face-to-face meetings with investors. On the subject of culture, 39% of companies (2016: 20%) provide a strong overview of the culture of their organisation. This allows investors and other stakeholders to understand how boards oversee their organisation culture and to hold them accountable. On a positive note, 94% of companies now mention culture in their annual report. Given the FRC’s recent recognition of the CEO as the primary setter of culture, it is disappointing to see that only 29% of CEOs make personal reference to culture in their opening statements.

Gender diversity still has a way to go. Women only fill 26% of FTSE 100 board roles, falling well short of the Hampton-Alexander Review goal of 33% by 2020. The picture is worse when it comes specifically to executive roles: 77% of the FTSE 100 and 85% of the FTSE 250 still do not have a woman in an executive role.

With the FRC due to release a new version of the Code1 next year and a code of governance for private companies looking more likely2, now is the time for all organisations to ensure that they are embracing best practice in corporate governance.

Corporate Governance Review 2017 highlights

 Corporate Governance Review 2017 highlights

 

References:

  1. FRC to review the corporate governance code
  2. UK Government – Corporate Governance reforms announced

 

Governance
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