UK Corporate Governance Code must focus on principles and outcomes, says ACCA

ACCA (the Association of Chartered Certified Accountants) has called for a stronger focus on understanding and applying the principles of good corporate governance, rather than a compliance-led ‘box ticking’ approach, in the UK Corporate Governance Code (the Code).

In a submission to the Financial Reporting Council’s public consultation on proposed changes to the UK Corporate Governance Code and Guidance on Board Effectiveness, ACCA says:

1.    The Code must be shortened and sharpened

ACCA supports the FRC’s endeavour to keep the Code a principles-based document.

“Over 25 years of application and development, the Code has lost some of its original clarity and consistency: and this consultation process is the ideal opportunity to bring it back to core principles,” said Jo Iwasaki, head of corporate governance at ACCA.

“If we shorten the Code to clear principles, supported by ‘comply or explain’ provisions, it can most effectively function as a framework document which can be used across all sectors and organisations. And of course, it can include signposts to specific practical guidance resources where appropriate for those who may need it.”

2.    The discussion around corporate governance has progressed

“In recent years, our understanding of corporate governance has shifted,” adds Iwasaki.

“Many organisations, ACCA included, have written extensively about corporate culture – and the need for business leaders to take responsibility for building a healthy and robust corporate culture.

“And it has also become more generally acknowledged that the role of the board is much broader than wealth maximisation. Today’s best performing companies bring together all of their internal and external stakeholders, the entire workforce included, to align with their purpose and create optimal value.”

3.    The Code should focus on outcomes over procedures

“For the Code to acknowledge this more comprehensive and nuanced view of corporate governance, it must move from a focus on mere compliance to processes and procedures to the effect of applying them.

 “The Code can most effectively encourage business to consider this holistic approach to corporate governance by putting its focus on intended outcomes, rather than isolated actions, details or procedures.

“What matters is not simply what companies have done, but more so what they have achieved by doing it. An outcome-focused framework requires companies to think independently about how to apply the principles to achieve this outcome – and therefore encourages a more meaningful exercise.”

ACCA’s comments to the FRC on the UK Corporate Governance Code and Guidance on Board Effectiveness are available in full here.

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About ACCA

ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 200,000 members and 486,000 students in 180countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 101 offices and centres and more than 7,200 Approved Employers worldwide, who provide high standards of employee learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

ACCA is currently introducing major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up-to-date and sought-after accountancy professionals globally.

Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. More information is here: www.accaglobal.com

"An outcome-focused framework requires companies to think independently about how to apply the principles to achieve this outcome – and therefore encourages a more meaningful exercise."

Jo Iwasaki - head of corporate governance