Free Law Dissertations - How Effective Is The Uk Revised Combined Code Likely To Be In Improving The
How effective is the UK revised Combined Code likely to be in improving the Governance of Listed PLC’s?
Introduction
The Revised Combined Code (2003 Combined Code) on Corporate Governance was published on 23rd July, 2003 by the Financial Reporting Council (FRC) and became effective for companies reporting for years commencing on or after 1st November 2003. This version replaced the original Combined Code of June 1998, which was a combination of the earlier Cadbury, Greenbury and Hampel Codes. The 2003 Combined Code accounts for interim proposals set out in both the Higgs report on non-executive directors and the Smith report on auditing standards, as well as the Turnbull report.
This report will assess the likelihood of the Combined Code’s ability to improve the Governance of Listed PLC’s by analysing, firstly, the three main stylistic characteristics that set it apart from its 1998 predecessor and secondly, the changes that are present in the Principles and Provisions. Part A - The style of the 2003 Combined Code
1.The Scale!
The large size of the 2003 Code represents a positive starting point for any analysis into the likelihood for improving corporate governance. There are 43 Principles and 48 Provisions and this starkly contrasts with the meagre combination of 17 Principles and 47 Provisions within the 1998 Code. However, in addition there are also seven Provisions within schedule A, which provides guidance on the design of performance related remuneration. These provisions originally formed part of the set of 47 Provisions within the 1998 Code. Further to this, schedule B also lists the seven provisions that provide guidance on the content requirements of Remuneration Reports. These too formed part of the 1998 Code but are now indoctrinated in legislation, with the result that inclusion within the main body of the 2003 Combined Code is no longer necessary. The result of this analysis is that, without embarking on any substantive investigation, there are many additional provisions within the 2003 Code, which means that the regulative scope of the 2003 Code is far greater than that of the 1998 Code, thereby creating a positive sign for likely improvement of corporate governance.
2.The use of ‘Supporting Principles’
Supporting principles were not present in the 1998 Code but it is equally important to note that they carry the same status as the main principles and are present for the presentational purpose of facilitating a bite-size code. This therefore shows a desire to create a more user friendly document, which again aids in the quest for improving corporate governance.
Another aspect of this structure is that the additions to the 2003 code are themselves found within the supporting principles, which are stricter than provisions. However Chambers states that it is also true that institutional investors are more able to check compliance with provisions than with principles.
Dissertations - Free Law Dissertations
