Combined Code review ‘timely'

The UK's Financial Reporting Council (FRC) of the review of the Combined Code of Corporate Governance is timely in light of the ongoing financial crisis, which in many ways can be regarded as a failure of corporate governance.

George Dallas, Director of Governance at F&C said: "We support this general review of the Combined Code to complement the specific Walker Review of governance in the UK banking sector. While we believe that the Combined Code has established a positive framework for corporate governance in the UK, it is important to take stock at periodic intervals and to reassess the effectiveness of the Code, particularly in light of lessons learned from the recent financial crisis."

Specifically, F&C believes there may be scope for greater scrutiny of how boards oversee the process of risk management - encompassing not just financial risks, but also relevant operational risks, including environmental, social and governance risks. This also offers the opportunity to review executive remuneration, with a view towards ensuring that incentive structures support long-term value creation. F&C also believes that a review of director elections, which might call for more frequent director elections or the annual election of board chairman and board committee chairmen might be an area that stands to enhance board and management accountability.

"F&C also welcome a review of the role of shareholders in the corporate governance process and how shareholders might play a more effective role in engaging with companies on matters of corporate governance, risk assessment, remuneration and strategy," Dallas concluded.