THE FINANCIAL Reporting Council (FRC) has this morning launched a widespread consultation on changes to the rules governing auditors and corporate stewardship, but has stopped short of proposing binding regulation.
The regulator is planning to update the UK’s 20-year old corporate governance code, as well as revising aspects of the stewardship code – introduced in 2010 to improve how companies and their investors interact.
Proposed changes include asking FTSE 350 companies to re-tender their external audit contract at least every 10 years, and increase scrutiny of how corporate boards prepare their annual reports.
Boards will also be asked to explain as part of their annual report why they consider the document to be “fair, balanced and understandable”.
The FRC is not seeking views on proposals – announced last October – that address boardoom diversity and remuneration, saying that deferring the decision will allow it to consider potential changes in more depth once the coalition government’s own plans have been finalised.
Baronness Hogg, chair of the FRC, said the consultation was “deliberately limited”, as the regulator wants to “build on the proven track record of the UK corporate governance code and the promising initial response to the stewardship code by reinforcing rather than fundamentally changing the codes”.
The FRC acknowledged the threat of overlapping regulation given that its European counterparts are also considering changes to EU-wide rules, but said that making sure the UK was already running best practices could “help to alleviate the pressure for more prescriptive action at EU level”.
Once the consultation is complete, the new regulations will start to apply to all new financial years that begin on or after 1 October 2012.