EY welcomes latest review of UK Corporate Governance Code

24 April 2014

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EY welcomes today’s launch, by the Financial Reporting Council (FRC), of its review of the UK Corporate Governance Code.

Hywel Ball, EY Managing Partner Assurance, commented:  “We are pleased the FRC has responded to concerns raised about earlier proposals on remuneration policy and reporting. In particular, it was originally suggested that if a significant proportion of votes are cast against a remuneration resolution, boards should explain what they intend to do about the situation. It is now suggested that companies set out how they intend to go about engaging with shareholders to assess concerns raised about any resolution. This avoids the risk of undermining other resolutions and gives companies more time to consider their response.    

Ken Williamson, EY Head of Corporate Governance, commented: “In other areas we raised concerns about the FRC’s earlier proposals to remove the Code’s provision requiring directors to make a going concern statement. This was done on the basis that International Accounting Standards and FCA Disclosure and Transparency reporting requirements would suffice for the narrower use of the statement in accounting terms.

“Even if it’s made clear that the statement is used in the narrower sense, making such a statement helps to focus minds and draws the board’s attention to this matter, so we are pleased the FRC proposes to retain the requirement for a going concern statement. We also note that a new provision is suggested requiring an additional statement by the directors on the board’s broader assessment of the company’s ongoing viability. This sets out a reasonable expectation that the company will be able to continue in operation over a specified period, with any appropriate qualifications and assumptions. This is more workable than earlier proposals for directors to state that they have a high level of confidence for the foreseeable future.”