In May, the UK Financial Reporting Council (FRC) launched a consultation on a revised Corporate Governance Code for the first time in five years. The exercise aimed at bolstering board accountability and driving improvements to internal risk controls and other governance mechanisms.
However, citing the need to protect competitiveness, CEO Richard Moriarty has recently announced that the soon-to-be-released final version of the Code would drop over half of the 18 initially proposed reforms. The scrapped proposals include heightened diversity reporting requirements and new audit committee responsibilities for environmental, social, and governance (ESG) issues.
"The UK rightly enjoys a strong reputation for high governance standards but it's important that we don't burden our best and brightest companies to the extent that it's not a level playing field versus our international competitors,” Moriarty said.
The FRC's decision has been labeled "pragmatic and proportionate" by City Minister Andrew Griffith, emphasizing the importance of maintaining a level playing field with international competitors.
This move is seen as aligning with the UK government's aim to reduce red tape on businesses and bolster London's standing as a financial hub. However, some have criticized the softening of the proposed governance requirements. Roger Barker, Director of Policy and Governance at the Institute of Directors (IoD), said the FRC's decision was "the latest stage in the unraveling of the government's corporate governance reforms."
The FRC plans to publish an updated version of the Code, applicable to premium-listed companies, in January, delaying the implementation of internal controls reporting for an unspecified duration to differentiate from the more intrusive approach in the US.