UK: The FRC and cost effective regulation

The UK's Financial Reporting Council has issued a discussion paper the purpose of which is to explore ways of increasing the cost effectiveness of its operations. Amongst the proposals in the paper is one suggesting a review of the relevance and complexity of corporate reporting. With regard to corporate governance, for which the FRC is responsible, the discussion paper states (pp. 11-12):

"We believe that the UK approach combines high standards of corporate governance with relatively low associated costs. Studies consistently show that the UK outperforms other countries in terms of governance standards, and that standards within the UK continue to rise. Reports published in 2005 by the FTSE ISS Corporate Governance Index and Governance Metrics International both put the UK at the top of the list of countries by average corporate governance score. A survey carried out by the National Association of Pension Funds in the same year found that 94% of large UK pension funds believed that corporate governance standards in UK companies had improved. Compliance costs in the UK are considered to be lower than in other countries with comparable standards. A study published in June 2006 by Oxera on behalf of the London Stock Exchange found that the corporate governance requirements were seen by some companies as one of the main factors influencing the choice between a UK and US listing (to the advantage of the UK)".