The Financial Reporting Council should reject calls to radically revamp its Combined Code on Corporate Governance, according to some of the U.K.’s leading listed companies.

The corporate regulator announced a review of the Code earlier this year after criticism that poor governance was a major cause of the financial crisis. Regulation of governance had been “so light touch as to have very little impact at all,” said the Association of Chartered Certified Accountants in a letter accompanying its submission to the review. And proxy consultancy PIRC called for a “fundamental reform” of the Code.

But several U.K. companies have urged the FRC to leave the code largely as it is, according to submission papers released by the regulator. “Now is not the time for reflex actions,” said pharmaceutical company GlaxoSmithKline in the paper that it sent the FRC. There should be a “period of reflection,” the company said, “before implementing fundamental change which will impact U.K.-listed companies during a period of economic strain.”

Some financial institutions may have failed to apply the principles of the Code, said telecommunications group BT, but “there is no evidence of wider failings.” A move to a more prescriptive approach to governance “is likely to damage rather than improve the effectiveness of governance,” it added.

There are no specific parts of the Code that need fixing and the “comply or explain” principle that underpins the Code is “working satisfactorily,” said beverage company Diageo. The company supported “evolutionary changes” to the Code, it said, but warned against revamping it out of “political expediency.”

Collectively, the largest companies said the FRC should tweak the Code to replace “comply or explain” with “apply or explain.” The subtle change in language would remind investors and proxy agencies that a decision to not comply with part of the Code did not necessarily mean a company’s governance arrangements were flawed, said the GC100, an association for the general counsel and company secretaries in the FTSE 100 companies.

“A different emphasis in language will assist companies, investors, and governance bodies including voting advisory services to maintain a healthy dialogue regarding the explanations given,” it said.

Topics