EC Plan on company law reflects developments to the UK’s governance regime
EY’s firm in the UK welcomes the publication today of the European Commission’s Action Plan on company law and corporate governance. The firm engaged in the Commission’s preceding consultations, and in other consultations from the UK Government and Financial Reporting Council on similar developments, which are now underway in the UK.
Andrew Hobbs, Associate Partner, Regulatory & Public Policy, commented: “It’s reassuring to see that various initiatives already undertaken in the UK to enhance the governance of companies listed here, are reflected in the Commission’s plans published today. In particular, the Commission’s intention to increase the transparency of companies' board diversity and executive remuneration policies, together with improvements in corporate governance reporting and shareholder engagement, match recent developments by the FRC and BIS.
“I believe the Commission is addressing the right issues and accordingly I welcome the prospect of UK companies not having to change the way they govern themselves.”
Recent revisions were made to the UK Corporate Governance Code, Stewardship Code and Guidance on Audit Committees. Draft legislation has been published on narrative and remuneration reporting, which covers the same ground as the EC’s action plan.
Hobbs added that: “The success of the UK corporate governance model owes much to the principles based nature of our codes and the success of the comply-or-explain approach, underpinned by the UKLA’s
Listing, Disclosure and Transparency Rules.
“This approach gives companies the flexibility to apply the principles of good corporate governance in the most effective and proportionate way for their particular circumstances. And of course, it’s not only companies, investors and regulators here in the UK that support the comply-or-explain approach, other markets do as well, as diverse as Germany, Brazil, China, Indonesia, Korea and Malaysia.
“We very much hope that the Commission will look to the UK regime’s recent and future developments as a model for its own initiatives to enhance corporate governance across the European Union. The comply-or-explain approach has won support already in the Commission, and the FRC’s ongoing work to incorporate and emphasise this approach in the UK Code sets a good example for others to follow.”