Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 23 February 2017, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features: the announcement that the FRC will undertake a review of the UK Corporate Governance Code and its response to the government’s Green Paper on corporate governance reforms, ICSA’s report on ‘untangling’ UK corporate governance, IOSH’s response to the government’s Corporate Governance Reform Green Paper proposing linking executive pay and bonuses to occupational safety and health performance, the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, and the Takeover Panel’s agreement with Unilever and Kraft Heinz on the basis on which disclosures should be made under the Takeover Code. Headlines (News updates & analysis) Corporate governance UK Corporate Governance Code to undergo review A fundamental review of the UK Corporate Governance Code has been announced by the Financial Reporting Council (FRC), taking into account work done by the FRC on corporate culture and succession planning. The aim of the review is to build on the Code's recognised strengths while considering the appropriate balance between its principles and provisions and the growing demands on the corporate governance framework. The FRC will highlight the importance of helping boards take better account of stakeholder views, linking executive remuneration with performance, and extending the FRC's enforcement powers to ensure that disciplinary action can be taken against all directors where there have been financial reporting breaches. The FRC will also seek input from a range of stakeholders to help guide the review. The FRC will begin a consultation on its proposals later in 2017, based on the outcome of the review and the government’s response to its Green Paper. Yesterday, the FRC published its response to the government's Green Paper on corporate governance reforms. The response states that the UK corporate governance framework is respected worldwide, and any changes need to build on its current strengths including the unitary board and the ‘comply or explain’ approach. However the response further states that more needs to be done to win back public trust and proposes reforms regarding the interests of major stakeholders, executive remuneration, large private companies and effective enforcement of the law. Corporate governance needs a rethink, ICSA report says ICSA: The Governance Institute (ICSA) has published a report on 'untangling' UK corporate governance. This is the first in a new series of thought leadership papers from ICSA which considers the principal issues in, and solutions to, the governance environment. The report looks at whether the corporate governance framework is still fit for purpose, and determines that as it currently stands it cannot achieve the additional objectives set out by the government since the framework was introduced. The paper recommends rethinking the policy approach to issues such as income inequality and tackling them across the overall economy using more efficient tools, promoting good governance standards in all sectors, and in other investment asset classes that receive a significant amount of money from UK investors, improving the effectiveness of the various mechanisms by which listed companies are held to account, and introducing effective legal sanctions to punish bad business behaviour. Link executive pay to occupational safety and health performance—IOSH The Institution of Occupational Safety and Health (IOSH) has announced that if executive pay and bonuses were linked to occupational safety and health performance, business leaders would have greater incentive to improve it. IOSH has made nine recommendations in its response to the government’s Corporate Governance Reform Green Paper proposals,. Such proposals were made following public concern about serious failures, such as those at Sports Direct. The recommendations include proposals for: (1) linking executive pay and bonuses to occupational safety and health performance and making bonus-targets more visible; (2) directors, remuneration committees and institutional/retail investors receiving adequate OSH training; (3) strengthening the UK Corporate Governance Code on stakeholder engagement about occupational safety and health issues; (4) designating a non-executive director to ensure the employee-voice is heard on OSH, supported by an advisory panel and stronger reporting requirements on stakeholder engagement on OSH; (5) strengthening reporting and governance requirements for large privately-held companies; (6) developing a new bespoke ‘Corporate Governance Code’ for large privately-held companies, produced by authoritative, independent experts; (7) introducing explicit positive directors’ duties on OSH, together with adequate OSH awareness training for all directors and equivalents; (8) lowering the turnover threshold for anti-slavery disclosures, so that more companies are required to provide them and extending the requirement to public sector organisations; and (9) requiring those employing 250 or more employees to publicly report on OSH performance and the use of standardised OSH performance metrics. Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 SI 2017/172: Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 have been updated. Following two public consultations and extensive engagement with a wide cross-section of stakeholders, employers with at least 250 employees are now required to publish the following four measures of information, based on a ‘snapshot’ of pay information taken on 5 April each year: the difference between the average hourly rate of pay for male and female employees, the difference between the average bonuses paid to male and female employees over the period of 12 months, the proportion of male employees, and of female employees who were paid bonuses during the period of 12 months ending with the snapshot date, and the proportions of male and female employees in each quartile of the pay distribution. The specified employers must make and sign a written statement to confirm the information published is accurate. The information must be published on the employer’s own website for at least three years from the date of publication, and must also be published on a website designated by the Secretary of State. Failure to comply with these obligations constitutes an ‘unlawful act’ within the meaning of the Equality Act 2006, s 34, which empowers the Equality and Human Rights Commission to take enforcement action. These changes come into force on 6 April 2017. Takeovers Takeover Panel agree Unilever and Kraft Heinz disclosures The Takeover Panel has agreed with Unilever and Kraft Heinz the basis on which disclosures should be made under Rule 8.3 of the Takeover Code (the Code). These requirements will continue to apply for as long as there is an offer period in relation to Unilever. It should be noted that Kraft Heinz has dropped its bid for Unilever. Dates for your diary Date Subjects covered 27 February 2017 Deadline for comments on the second consultation paper (CP43/16) published by Prudential Regulation Authority (PRA) on the implementation of MiFID II. The consultation paper proposes changes to the PRA Rulebook and supervisory statements relating to new management body and organisational requirements. There are also proposed changes to granting authorisations in respect of operating an organised trading facility, emission allowances and structured deposits. 10 March 2017 Deadline for national competent authorities subject to ESMA's guidelines on the Market Abuse Regulation for persons receiving market soundings to notify ESMA. 17 March 2017 Deadline for the government's call for evidence seeking views on possible reasons for the increase in limited partnerships and whether changes are needed to the wider framework. Following a recent increase in the number of limited partnerships registered in Scotland in comparison to those registered in England, Wales and Northern Ireland, the government has expressed concerns that some of them are being used for criminal activity. A call for evidence has been launched seeking views on possible reasons for the increase and whether changes are needed to the wider framework. 17 March 2017 Deadline for the European Commission's public consultation into the Capital Markets Union (CMU). The CMU is the EU-wide plan to strengthen capital markets and investment in the long term. Evidence-based feedback and specific operational suggestions are sought.