New UK governance code calls for performance reviews of board members
28 May 2010
The Financial Reporting Council (FRC), the independent regulator responsible for overseeing corporate governance to the UK's Combined Code, has introduced a raft of changes to the UK Code on Corporate Governance.
With the changes company directors at Britain's 350 largest listed companies will, in future, be required to face annual elections and regular performance reviews.
Since its introduction in 1992, the UK Code on Corporate Governance has outlined broad principles, rather than rules that British companies were expected to follow.
With the latest update to the code, some of the most radical changes in its history will be incorporated, following reviews in 2005 and 2007.
The changes have prompted a broad range of responses from trade bodies and investors.
Though Richard Lambert, director-general of the Confederation of British Industry (CBI) says the decision to stick with a principles-based code was commendable, he voiced concerns that the move to annual elections of directors could have an undesirable impact.
"It could promote a focus on short-term results, make boards less stable and discourage robust challenges in the boardroom,'' Lambert said.