The Code is applicable to all companies with a premium listing, whether incorporated in the UK or elsewhere. The new Code applies to accounting periods beginning on or after 1 January 2019.
For those of you who are tasked with creating content for your annual report, there are 5 key impacts that the new Corporate Governance Code has:
1. Going beyond your shareholders
There is a new requirement to demonstrate that the directors of the company are applying section 172 of the Companies Act 2006. This means that engagement with wider stakeholder groups than shareholders needs to be discussed. Actions and outcomes from this stakeholder engagement should also be discussed.
2. Emphasis on improved dialogue with your workforce
A particular focus is given to engagement with the workforce. The directors have to implement a process for better workforce engagement.
3. Defining your culture
A description of the culture of the company and how it is monitored and assessed by the directors has to be included.
4. Disclosing diversity
A number of disclosures around diversity are required, such as how diversity is supporting the strategy of the company and how succession planning is ensuring a diverse pipeline.
5. Matching appropriate rewards to performance (REM)
There are a number of changes to the approach to remuneration, which will need to be reflected in the Remuneration Policy and Annual Report on Remuneration. These include a set of principles that need to be applied when constructing the remuneration policy, explanation of the strategic rationale behind the remuneration policy and whether the remuneration policy operated as intended.
It is clear that the Code is going to have a significant impact on the way companies present both their Strategic Report and Governance narrative.
Here at Jones and Palmer we think these changes to the Code provide an excellent opportunity to make businesses more understandable and therefore to help stakeholders make better decisions in how they choose to engage with them.
If you are still unsure what the impact of the Code will mean for your business, don’t worry help is at hand. Over the next few weeks, we’ll be providing some helpful content in the shape of toolkits to help support your reporting journey with the new Code.