UK: FRC review of the Combined Code - IoD responds to final report

The Institute of Directors has published its response to the final report report published by the Financial Reporting Council as part of its review of the Combined Code on Corporate Governance: see here (pdf).

The IoD is broadly supportive of the proposed changes but states that greater attention should be given by policymakers and market participants to the way in which the Code is implemented. With regard to the Stewardship Code for Institutional Investors, the IoD argues that its likely impact should not be overplayed because institutional shareholders' preference for 'exit' rather than 'voice' is likely to persist where holdings in individual companies remains small.

UK: IoD responds to Walker Review consultation paper

The Institute of Directors has published its response to the consultation paper published by Sir David Walker as part of his review of the governance of banks and other financial institutions. The IoD comments on each of Sir David's recommendations in its response and observes: 

Our overall observation is that the Review provides an informed and reasoned response to a number of important corporate governance issues. To its credit, it has not been unduly influenced by populist demands to overthrow the overall UK model of corporate governance (which is based on a distinctive mixture of hard and soft law) in favour of a heavily regulated approach. Equally, the Review has recognised – given the magnitude of recent governance failures – that an unthinking defence of the status quo is untenable. Reflecting this, it has made a number of significant recommendations for reform.

... In our view, a number of the Review’s recommendations – although potentially relevant to systemically important financial institutions – would not be desirable governance standards for non-financial companies (or for smaller listed and unlisted companies). Consequently, incorporation of the Review’s recommendations into the Combined Code would imply a split of the Code between provisions that apply to financial firms alone, and those that apply to all companies. This is not a step that we would support. In our view, the Combined Code should consist of high level best practice principles for all listed companies. It should not be carved-up on a sectoral basis. A move towards incorporating sectoral provisions into the Code would represent an excessively prescriptive approach to the overall corporate governance framework, and an unwarranted presumption on behalf of regulators regarding how specific industries and sectors should structure their activities".