The new UK Code on Corporate Governance, formerly known as the Combined Code on Corporate Governance, was published on 28 May 2010 by the Financial Reporting Council (FRC). The revised Code is part of a response to issues around corporate behaviour identified in the aftermath of the 2008 financial crisis.

The Code sets out standards of governance for all companies with a premium listing of equity shares, regardless of whether they are incorporated in the UK or elsewhere. The new Code continues to operate on the principle that companies must follow the Code on a “comply or explain” basis.

Among the main changes to the Code are requirements that:

• the company’s business model must be explained and that the board should be responsible for determining the nature and extent of the significant risks it is willing to take;
• performance-related pay should be aligned to the long-term interests of the company and its risk policy and systems;
• new principles designed to promote proper debate in the boardroom, more balanced board composition and to avoid “group think” by the directors should be followed;
• the chairman of the company should hold regular development reviews with each director and all FTSE 350 companies should have externally facilitated board effectiveness reviews at least every three years; and
• all directors of FTSE 350 companies should be put forward for re-election every year.

The Irish Stock Exchange (ISE) has launched a market-wide consultation on the implementation of a revised corporate governance code for Irish listed companies. The consultation period will run until 13 August 2010. The purpose of the consultation includes seeking participants’ views on the most appropriate method for implementing the UK Code. The ISE proposes to reproduce the provisions of the UK Code together with the recommendations made in a report commissioned by the ISE and the Irish Association of Investment Managers earlier this year. This would have the effect of creating a new Irish Corporate Governance Code whilst retaining all aspects of the UK Code. William Fry will be preparing a submission to the ISE on the draft new Irish Code and we would welcome any contributions you may have.