One of the bedrocks of the Combined Code on corporate governance - the 'comply or explain' approach - is under review from the Financial Reporting Council .

The FRC is consulting on the 'comply or explain' approach following concerns raised by companies and investors that the system was ineffective.

'Companies do not want to invite adverse publicity or adverse votes arising from a “box-ticking” approach to the Code by investors or those who advise them; and they may be deterred by the time required to “explain”,' the FRC said in a consultation document.

'For their part investors, who may hold equity in many hundreds of companies in the UK and overseas, may simply consider themselves unable to deal adequately with all explanations in detail.'

The FRC added that there were also concerns that some companies were not explaining there reasons for no-compliances adequately.

No proposals for alternative regulation have been put forward yet.

'The FRC wants to assess how serious the above frustrations are and, if their effects are material, to consider how best to mitigate them,' the document said.

The consultation closes on 20 July.

Further reading:

Read the consultation document

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