Research & Strategy

By Daniel Redman - Head of Research and Strategy - 26 Apr 2018

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Governance reporting continues to develop and as the AIM Rules change and the FRC provides an updated Code, the QCA has this week published a refreshed Corporate Governance Code, reflecting the changing governance landscape.

A pragmatic approach

The Code opens with a letter from Tim Ward (Chief Executive of the QCA) and Will Pomroy (Chair of the QCA Corporate Governance Expert Group) and echoes the sentiments of Larry Fink’s infamous letter in outlining the importance of positive engagement between companies and ALL of its stakeholders. Without this, results will be futile.

The updated Code continues to adopt a pragmatic, principles-based approach. This pragmatic approach means that the Code can also be adapted for use by privately owned businesses too. Particularly important given Theresa May’s government has called for better governance reporting for private business. The Code specifically states, “we have identified ten principles that focus on the pursuit of medium to long-term value for shareholders without stifling the entrepreneurial spirit in which the company was created.”

The QCA has included a very useful disclosure summary which sits with each principle of the Code. This indicates whether the principle requires some level of disclosure either on the corporate website or within the annual report and accounts or, indeed, both.

Culture and sustainability

A notable area of development in the Code concerns principles 3 and 8, which address social responsibilities and culture respectively. Principle 3 asks that companies consider wider stakeholder relationships and wherever the company’s impact on society has potential to affect its value creation for shareholders, these issues should be integrated into the company’s strategy and business model. Furthermore, the principle requires companies to explain how feedback from stakeholders is obtained and actioned.

Principle 8 requests that boards embody and promote a corporate culture that is based on sound ethical values and behaviours. The Code says that, “the corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.”

Our thoughts

At Design Portfolio, we have been offering more and more support to our clients who are looking to develop their corporate governance reporting. In anticipation of the updated FRC UK Corporate Governance Code, we have been particularly focused on supporting clients in addressing corporate culture and wider stakeholder concerns in the governance report. It’s great to see that the QCA Code has developed to reflect the growing importance of wider stakeholder engagement and ethical corporate culture and we look forward to working with our smaller listed companies to meet the principles of this Code.

If you would like to learn more about how you can improve your corporate communications, please contact rochelle.ohagan@design-portfolio.co.uk.