Starling Insights Editorial Board
The UK Financial Reporting Council (FRC) recently published a "mythbuster" document on corporate governance and stewardship, which sought to dispel common misconceptions and provide greater clarity around these concepts.
The FRC explains therein that, while it does not have enforcement powers regarding the governance code, companies must "comply or explain." If a firm does not comply, and does not provide a high-quality explanation as to why, the FRC will send them recommendations for improving reporting.
The document also states that the Governance Code supports progress on ESG issues, as it asks boards to assess the risks facing their firms, take decisions that support long-term success, and provide more transparency to investors on related factors. These are all core aspects of good governance, which drives better performance on environmental and social issues.
"Companies that are well-governed are also generally more likely to create long-term value for shareholders, which can benefit investors in the long run," the FRC wrote. "[Governance and stewardship] work together to promote responsible corporate behaviour and long-term value creation."
Next week, Starling will publish “Renal Failure: A Crisis in Audit Culture?”, a Deeper Dive Supplement to our 2022 Compendium, which will discuss, among other things, the FRC's efforts to reform audit quality and governance in the UK. Join Starling Insights to be alerted when it is released!
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