Nov 7, 2023
UK Waters Down Corporate Governance Reforms After King’s Speech
, Bloomberg News
(Bloomberg) -- The UK’s accounting watchdog has ditched more than half of its planned changes to the corporate governance code, saying this will support economic growth.
The Financial Reporting Council scrapped proposals to give environmental, social and governance reporting responsibilities to audit committees, as well as changes to diversity reporting and shareholder engagement requirements, it said in a statement Tuesday.
FRC Chief Executive Officer Richard Moriarty said the move will support the UK’s competitiveness and comes amid a “much wider debate about business reporting requirements and burdens across the economy.”
It comes on the same day that long-awaited legislation for audit reform was left out of the King’s Speech, which sets the UK’s legislative agenda for the year. It’s another sign of backtracking on plans to strengthen corporate governance following a series of high-profile corporate collapses, including construction firm Carillion and cake chain Patisserie Valerie.
The FRC said a number of proposals were dropped because of last month’s decision by Business Secretary Kemi Badenoch to scrap legislation to tighten up corporate governance rules.
A lack of political will since Carillion’s collapse six years ago means the government’s promise of comprehensive reform will remain unfulfilled, according to Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales. “The government’s faint-hearted attitude to protecting and maintaining that reputation does the economy no favours,” he said.
Roger Barker, director of policy at the Institute of Directors, called the absence of legislation a major omission. “It appears that corporate governance is not seen as a vote winner by politicians — despite the wide-ranging impact of the collapses of companies like Carillion and BHS,” he said.
The FRC will go ahead with revisions on internal control reporting requirements, including giving more time for implementation. The updated code will be published in January.
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