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FRC to focus on company culture and behaviour

15 January 2015

FRC to focus on company culture and behaviour  - Read more

The Financial Reporting Council (FRC) is to focus on company culture and behaviour as levels of compliance with the UK Corporate Governance Code have continued to increase

Reporting has become more transparent and informative, with audit committee reports and diversity reporting, particularly improved.

The FRC annual review of developments in Corporate Governance and Stewardship for 2014 has seen an increase in signatories to the Stewardship Code with signs of better engagement with large companies by investment managers. However, more needs to be done to ensure asset owners and managers follow-through on their commitment to the principles set out in the Code.

The report highlights the importance of good culture within organisations. Commenting on board culture, FRC Chairman Sir Win Bischoff said: ‘The governance of individual companies depends crucially on the culture that is in place. The UK’s strong governance culture encourages companies to list in London and provides assurance to investors. Unfortunately we still see examples of governance failings in this area. Boards have responsibility for shaping the culture, both within the boardroom and across the organisation as a whole. This requires constant vigilance.

‘Changing culture is not an easy task. Our recent guidance on risk management highlighted the need for boards to think hard about how they can better assess whether the culture practised within the company is the same as that which they espouse, particularly under pressure.

‘During 2015 the FRC will assess how effective boards are at establishing company culture and practices, and embedding good corporate behaviour, and will consider whether there is a need for promoting best practice. We will continue to address emerging governance issues while assessing the impact of recent Code changes.’

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