New Governance Code launched....but clarity needed over use of web for disclosure.
The UK’s Financial Reporting Council launched the new Governance Code this month, after many months of consulting on what need to be changed about the old Combined Code. Aside from the name, the Code underwent a number of other changes. Some of these were structural – the Code has been reorganised to emphasise various themes such as Leadership. Others were more controversial, such as the requirement for annual Director re-elections.
And others will have a direct impact on IR teams, company secretarial teams, and corporate communicators.
First the requirement to explain the company’s business model, the basis on which the company makes money. By observation, few companies do that well. Linking business assets, to process, distribution channels and clients, with sufficient clarity can be a tough thing to do. However, corporate websites can help. The ability of an interactive model to explain the corporate model is significantly greater than a static graphic.
Second the role of the corporate website in providing access to the corporate governance statement. It seems a fairly obvious solution. With governance statements running to over 25 pages of the annual report, placing a ‘summary’ in the hard copy report, and the bulk on-line, seems to make sense, particularly as many companies already provide additional content – such as a Governance Charter – online.
The FRC final Code however, combined with the FSA’s Listing Rules and Disclosure and Transparency Rules – are less than clear. The LR’s refer to the need for the governance statement to appear in the annual financial report (LR 9.8.6), while DTRs note (7.2.9) the option of using the company’s website. Meanwhile, the Governance Code highlights some information which must appear in the annual report, and some which can appear on the website.
global3digital has contacted the regulators to establish clarity, and will keep you posted.
