The Financial Reporting Council (“FRC”) published its annual Review of Corporate Governance Reporting considering the clarity and quality of reporting on the UK Corporate Governance Code (the “Code”). Companies listed on the main securities market of Euronext Dublin are also required to comply with the Code together with the Irish Corporate Governance Annex.
The review found that there was a general improvement in reporting under the Code compared to 2020, including in relation to reporting on environmental and social issues. However, the FRC were disappointed that the quality of explanations provided for non-compliance with the Code has not significantly improved, with most explanations lacking supporting information or using boilerplate language. Diversity and inclusion and succession planning at board-level and through the pipeline continue to remain a concern. The FRC also notes that there continues to be minimal information on how diversity and inclusion policies and objectives link to company strategy. In addition, few companies explained how remuneration aligns with company purpose and values.
The FRC sets out its reporting expectations for 2022 with a key message that "good reporting is characterised by clear and consistent explanations, supported by real-life examples of application and cross-referencing between related initiatives and sections".
Other reporting expectations for 2022 include:
- Compliance - clear and meaningful explanations for any departures from the Code, avoidance of boilerplate disclosures, focus on outcomes and actions
- Alignment – greater attention to the alignment between reported good governance and company practices and policies, strategy and business models
- Culture - increased focus on assessing and monitoring culture
- Succession planning - better reporting on succession planning, including how this links to board composition and delivering diverse challenge
- Diversity - explaining diversity policies and demonstrating their link to company strategy
- Risk management – focus on effectiveness of risk management and internal control systems
- Remuneration – better explanations on how executive remuneration is aligned with the company's purpose, values and strategy.
Good reporting is characterised by clear and consistent explanations, supported by real-life examples of application and cross-referencing between related initiatives and sections.