Almost half of FTSE 350 companies failed to measure up to all the standards in the Financial Reporting Council’s (FRC) UK Corporate Governance Code.
In a report out today by professional services firm Grant Thornton, only 57 per cent of the 312 FTSE 350 companies with years ending between June 2014 and June 2015 studied were fully compliant with the UK Corporate Governance Code, which sets out standards for good practice in areas such as board leadership, remuneration and accountability, in their last set of accounts.
This year’s report’s findings represent a drop from the 61 per cent who met all the standards of the code the year before.
Of those who missed the mark, 90 per cent failed to comply with all but one or two of the Code’s provision, the most common being the requirement to have at least half the company’s board, with the exception of the chairperson, be independent non-executive directors, which 13 per cent of all the FTSE 350 companies studied failed to measure up on.
The reasons for falling foul of the FRC’s code are also getting better, with 69 per cent of those who did not meet all the provisions having good explanations for their non-compliance, compared with 59 per cent last year.
“In its broadest sense, governance serves as a vital tool in providing the assurance which instils trust and integrity in the UK's financial markets,” said Simon Lowe, partner and chairman of the Grant Thornton Governance Institute. “Although we may be seeing levels of full compliance plateauing, it is encouraging to see that an increasing amount of effort has been given to providing quality informative explanations.”
However, the report did point to a worrying lack of focus on culture and values, with only 13 per cent of chairpeople personally discussing culture in their primary statements, despite regulators paying increasing attention to this area.
Lowe continued: “2015 was a relatively quieter year in terms of regulatory changes, with the FRC tweaking around the edges rather than making full-scale changes to the UK Corporate Governance Code, as was the case in the previous year. To a large degree, the market is still digesting those developments and more companies are making robust explanations and disclosures, rather than seeking to fully comply with the Code.”