Public Consultation on the UK Corporate Governance Code

29. 3. 2018
Cass Business School, Frank Bold and Sheffield Institute of Corporate and Commercial Law submitted a joint response to the consultation launched by the Financial Reporting Council

Authors: Andrew Johnston, Professor at the University of Sheffield School of Law, Director of the Sheffield Institute of Corporate and Commercial Law and scholar of the SMART project; Filip Gregor, Head of Responsible Companies at Frank Bold and coordinator of the Purpose of the Corporation Project; and Jeroen Veldman, Senior Research Fellow at Cass Business School and coordinator of the Modern Corporation Project. 

Overall comments:

We support the aim of the FRC to simplify the Corporate Governance Code and elaborate further details in the Guidance. We also welcome the increased focus on desired outcomes, rather than on superficial compliance. We believe that this approach allows for a more effective use of comply-or-explain and apply-and-explain principles with respect to key provisions. In our response, we highlight a number of areas where these options are currently underutilised.

We particularly welcome the proposal to recognise, in a revised Code, the role and contribution of employees in achieving corporate success and to encourage their involvement in corporate governance. We agree with the increased emphasis on corporate purpose and the relationship of the company with wider society. On the other hand, our view is that the Code and the Guidance do not provide sufficient advice on how boards should engage with the concerns of their stakeholders and those of society as a whole.

This is particularly relevant in relation to the issues of environmental sustainability and human rights risks in a company’s value chains. Given the complexity of these issues and the difficulties associated with developing binding international and transnational regulations, more guidance for boards would be highly desirable. Unfortunately, neither the Code, nor the Guidance include a single reference to environmental sustainability, natural capital, climate issues, planetary boundaries, or human rights.

Finally, we think that the Code would benefit from using the multiple-capitals model advocated by the International Integrated Reporting Framework and South African King IV Report because it provides a clearer definition of what success of the company means.

With respect to the Stewardship Code, we recommend that it should adopt as its focal point the interest of the dispersed shareholder with a long-term perspective. Correspondingly, we recommend that the Corporate Governance Code and the Stewardship Code should start to differentiate between types of shareholder and control positions in order to develop more specific mandates for different categories of investors. We also recommend that the Code specifies in clear terms an expectation that investors obtain feedback from their end beneficiaries on key elements of the stewardship policy.

Read our full response here:


There is where is cleanest business:

The Purpose of the Corporation Project

Frank Bold