The Financial Reporting Council have released their annual review of reporting against the Corporate Governance Code
. The report considers the quality of reporting against the Code and lays out the Council’s expectations for 2021 reporting.
The report reviewed approximately 100 companies from the FTSE 350 and FTSE Small Cap. The companies would have been reporting against the updated 2018 code for the first time and the Council has found that companies haven’t demonstrated the high quality of governance that it would expect. It found that reporting was often formulaic and more box ticking than displaying effective governance.
Companies should move away from boilerplate statements to provide more meaningful narratives of the application of the Code.
Other key messages from the Council include:
Many companies expressed that they fully comply but were only able to demonstrate such compliance in their report, the Council expects companies to be clear and transparent about provisions of the Code that they are complying with.
· Purpose, Culture and Values
Many companies seemly conflated purpose statements with marketing slogans, mission statements or vision statements. The FRC expects a more rigorous approach to culture and the establishment of appropriate monitoring of the culture and its alignment to the organisations purpose, values and strategy.
The FRC has reiterated that companies should identify their key stakeholders, explain their relevance in connection with the organisations strategy and identify key issues relating to each group. Reporting should include discussions on feedback received from stakeholders and how it has informed strategy.
· Succession Planning
There seems to have been little improvement in the quality of disclosures on this matter based on the minimal insight provided in the reports reviewed. Many appeared to simply focus on the appointment process rather than the plans for succession. Our Company Secretarial team will be glad to discuss annual reporting requirements, including how we could support you further.