Annual report by UK's Financial Reporting Council says quality of dialogue between investors and companies has improved
The quality of corporate governance in the UK has dipped slightly with new entrants to the market, but remains ‘high’ overall, according to a report by the country’s Financial Reporting Council (FRC), which is charged with promoting good governance to foster investment.
About 90 percent of the members of the FTSE 250 Index comply with all but one or two provisions of the 2014 UK Stewardship Code, the FRC says. Meanwhile, 72 percent of companies on the index now offer expanded descriptions of the work performed by their audit committee, compared with 65 percent in 2014, the council says.
The quality of dialogue between shareholders and investors has also improved, with many investors saying companies are more responsive to their concerns, according to the FRC, which said last month it would name and shame asset managers who have signed the Stewardship Code but are failing to take measures to help ensure high-quality reporting and good governance.
A ‘disappointing number’ of companies make no reference in their reporting to diversity of race and experience, however. New companies have also been slow to adopt the provisions of the Stewardship Code, which comprises a series of principles aimed at promoting good governance, as firms are ‘taking time to think through reporting on risk management, internal controls and longer-term viability reporting,’ the FRC says.
‘The UK Stewardship Code has helped to raise the profile of stewardship, normalized discussions about stewardship in the investment chain and led to improvements in the quality and quantity of engagement between investors and companies,’ says Winfried Bischoff, chairman of the FRC, in the preface to the report. ‘We wish to maintain momentum by ensuring that signing up to the code is a true marker of commitment.’
