Grant Thornton has published their seventh annual review of the UK’s FTSE corporate governance disclosures. Each year the review assesses companies for compliance with the policies and provisions of the Combined Code (the Code) and looks at the quality of explanations of underlying practices among the UK’s largest listed companies. In addition, the review covers aspects of the Business Review legislation, introduced within the 2006 Companies Act. This seeks to address the EU transparency agenda of providing greater insight to stakeholders on how management assess and manage business performance. The enhanced disclosure requires companies to move beyond the narrative by disclosing key performance indicators and business metrics.
The 2008 review uncovers mixed messages as to the state of corporate governance among the FTSE 350.
Positive trends include:
- More informed levels of explanation where companies choose not to comply with the Code
- Continued strengthening of the presence of independent non-executives on the boards of the Mid 250
- High level of disclosure in line with the new Business Review requirements. However, a number of challenges remain:
However, a number of challenges remain. Of the 44% of companies who claim full compliance with the Code, the review found that only a quarter make all the disclosures necessary to support their claim. This leaves a hard core of nearly a fifth who choose not to comply. The quality and usefulness of the explanations given for non-compliance also varies greatly, with significant numbers providing only the bare minimum of information. However, on a more positive note, the review concludes that despite the hard core of ‘reluctants’, the FRC’s recent finding to leave regulation and guidance largely well alone is the right one. The challenge remains one of application.
Click here to read the full report
Picture from Creative Commons: Flickr: Anyhoo
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