Commenting on the UK Corporate Governance Code 2014 which comes into force today, Associate Lecturer in Law Colin Moore says that it is a ‘matter of concern’ that new principles are not being applied to a much wider range of companies.<\/p>\n
Colin says: ‘The new UK Corporate Governance Code 2014 released today (1st Oct. 2014) makes a number of changes regarding the recommended governance procedures of larger corporations operating within the UK. Most importantly, in the light of recent high profile corporate insolvencies, extended emphasis is placed upon risk management. Directors are now expected to report annually on risks that might threaten the company\u2019s business model, future performance, solvency or liquidity.<\/p>\n
‘Directors\u2019 pay and bonuses is another key theme addressed in the updated code. The code now emphasises that: companies ought to avoid paying more than necessary to directors, any increase in pay should be linked to performance, and that remuneration should be potentially withheld in appropriate circumstances. The code also recommends that a balance be struck between fixed and performance related pay for directors.<\/p>\n
‘Alongside these changes, the new code also provides new rules on transparency of shareholder\u2019s general meetings, share remuneration schemes, and the appropriateness of accounting mechanisms. However, it should be remembered that these guidelines apply only to companies seeking a \u2018premium listing\u2019 on the UK stock exchange, and even then only on a \u2018comply or explain basis\u2019. While most premium listed companies appear to be complying rather than explaining, it continues to be a matter of concern that these \u2018best practice\u2019 corporate governance principles are not applied to a much wider range of companies.’<\/p>\n