Rather than implementing a code however, the FRC intends to tackle this problem through working with their stakeholders to encourage improvement as opposed to adding to regulatory requirements. In effect, “giving the regulated the opportunity to make existing regulation work”. Their overarching intentions are to improve behaviour through a healthy corporate culture which, in turn, creates trust in businesses, reduces company failings and serves the needs of wider society.
In order to achieve this, the FRC states that a board has a number of objectives to fulfil:
- Defining the purposes of the company and what type of behaviours it wishes to promote in order to achieve its business strategy.
- Establishing its own culture and making choices:
- how to align the values and purpose to the company’s strategy
- how to integrate new leaders into that culture, especially during times of a merger or acquisition
- how to maintain culture under pressure
- how to decide whether different parts of the business should operate different cultures
- how to actively communicate with stakeholders in a constructive way.
Overall, by delivering practical, market-led observations and not a Code, the FRC can review how effective boards are at establishing good corporate behaviour, culture and practices, and how to help them improve. When these practices are integrated into the business model, the FRC believes that good things follow, in regards to financial and reputational aspects.
From a Corporate Reporting standpoint, there are a number of avenues that need to be addressed. First, if your company is working with the FRC to promote good corporate behaviour, then this should be communicated transparently. Secondly, this process may involve a change in responsibilities of your board, and these changes in responsibilities should also be communicated clearly. Finally, it is important to ensure that the changes you have made are explained in detail; when will these be implemented, why have they been added, why weren’t you doing this before? These are all important aspects that you readers will question and, consequently, it is beneficial for your company to discuss everything up front straight away.
For more information about how we can help with your corporate communications why not talk to a member of our team.