The Financial Reporting Council (FRC) is currently reviewing the implementation of the 2003 version of the combined code on corporate governance, and has invited listed companies, directors and investors to comment, by 14 October, on their experiences.
This represents an opportunity for plcs who have reported for the first time
this year to share insight into the challenges, practical issues, and progress
While I welcome the FRC’s request for feedback, I hope the consultation will
not be used as a vehicle to bring radical change to the 2003 code. There is a
great danger that the review will trigger a backlash against tighter regulation.
We are already starting to see benefits from the combined code increased
transparency, better governance and more open communication with stakeholders.
Many firms have embraced the new requirements and have demonstrated that
better financial information is more than an end in itself. Transparent
reporting should be a fundamental part of an organisation’s culture, driving
decision-making and management.
Yet there are still some firms that will do only the bare minimum. Those
companies that pay only lip service to governance will in turn experience
minimal benefit. A tick-in-the-box approach can only lead to regulation becoming
My fear is that a groundswell of shortsighted complaints could prompt the FRC
to change the code for the worse. It is vital that our industry doesn’t revert
to the regulatory regime that reigned during recent financial scandals.
The code has been a positive start in forcing companies to act correctly. The
imminent review must not undermine its potential.
The FRC is tasked with striking a delicate balance between helping firms
comply in a way they find sustainable and maintaining the high principles of
The challenge is to make best practice the norm. Negative feedback must not
lead to a watering down of the code,or the principles of transparent reporting
and accountability will be in danger of being eroded.
Norman Green is vice-president of finance at Oracle UK, Ireland and South