As predicted by Accountancy Age last week, the suggestions of both the Higgs and Smith reports were generally accepted by the FRC, but it was agreed that the code, into which both reports? proposals were to be written, would be significantly watered down to avoid it becoming too proscriptive. A working group has now been set up with the aim of producing a revised draft by July with a view to bringing the code into effect as soon as is possible after that.
‘We were very pleased when the suggested amendments came out, particularly that companies outside the FTSE-350 would only be required to have two independent directors,’ said John Pierce, chief executive of the Quoted Companies Alliance, adding that it would reduce the cost burden significantly for smaller companies.
However, Tim Copnell, director of the audit committee institute at KPMG, said this exception went against what the code was trying to achieve. ‘If the code is all about “comply or explain” then it should be easy enough for smaller companies to explain rather than to create different rules for different companies,’ he said.
ICAS was also concerned ‘at reported comments from shareholder representative bodies that they will seek “full compliance” with the revised code,’ according to its deputy director of accounting and auditing David Wood. ‘This would seem to depart from the “comply or explain” approach that we strongly support,’ he added.
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