Corporate Governance Code and Stewardship Code

A look at what you need to know about the 2012 Corporate Governance and Stewardship code changes.

Jump to the main content area

Each year sees new rules, regulations and legislations in the world of corporate reporting, and 2012 was no different. While remaining up to date with them is essential for all businesses, it is also difficult, and that’s where we can help. Jones and Palmer stays on top of all market and legislation updates, in order to offer a service that is relevant, compliant, and first-rate.

In September 2012, limited but important changes were made to both the Corporate Governance Code and the Stewardship Code, to be applied for Financial Years beginning on or after 1 October 2012.

First up, the Corporate Governance Code, which is responsible for maintaining the UK’s high levels of boardroom good practice. Among the changes to the Code delivered in September were the requirement to put any external audit contract out to tender at least every ten years to maintain quality, and to release more information to shareholders about how the audit was carried out.

Also new was the need for boards to confirm that the annual report and accounts taken as a whole are fair, balanced and understandable. And finally, companies are now required to explain and report on the progress of their boardroom diversity.

Also updated was the UK Stewardship Code, which aims to enhance the quality of engagement between institutional investors and companies, in order to help improve long-term returns to shareholders. The changes included the need to clarify the stewardship responsibilities of asset managers, and to detail any activities that are outsourced.

Asset managers are also encouraged to have the processes that support their stewardship activities independently verified, to provide greater assurance to their clients.

The other key change introduced the need for institutional investors to explain more clearly how they manage conflicts of interest.

Both Codes apply on what is known as a “comply or explain” basis, meaning they’re not rules as such, but principles and guidance on how best to follow them. However, shareholders may ask a business to explain why if they choose not to follow a certain part of the Code.