Corporate governance

Corporate governance is not specifically defined either by the Companies Act 2006 or any other legislation. The generally accepted meaning is that given by the Cadbury Committee, which set out recommendations on the arrangement of company boards and accounting systems to mitigate corporate governance risks and failures and which, in 1992, produced the ‘Cadbury Report’ titled ‘The Financial Aspects of Corporate Governance’. In this report, corporate governance is defined as ‘the system by which companies are directed and controlled’.

For an overview of the corporate governance requirements relating to share schemes, see Practice Notes: An introduction to corporate governance and share schemes and for guidance on the more practical aspects of the UK corporate governance regime, see Practice Note: Corporate governance—fundamentals.

UK Corporate Governance Code

In the UK, the Financial Reporting Council (FRC) is responsible for regulating corporate governance in listed companies through the UK Corporate Governance Code (Code). Adherence to the Code is an expectation of institutional shareholders and their representatives (in particular the Investment Association (IA), the Pensions and Lifetime Savings Association (PLSA) and the Pensions & Investment Research Consultants (PIRC)).

The Code comprises principles

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