Directors: Codes of Practice

(asked on 3rd March 2021) - View Source

Question to the Department for Business, Energy and Industrial Strategy:

To ask the Secretary of State for Business, Energy and Industrial Strategy, what assessment he has made of the effectiveness of Section 172 of the Companies Act 2006 in providing incentives for directors to act in a way that considers seriously the interests of stakeholders other than shareholders.


Answered by
Paul Scully Portrait
Paul Scully
This question was answered on 12th March 2021

The Government introduced new obligations under the Companies (Miscellaneous Reporting) Regulations 2018 effective from 1 January 2020. These included new reporting requirements which give shareholders and stakeholders more information with which to hold boards of directors to account and more visibility for good boardroom practice. Alongside the regulations, the Financial Reporting Council (FRC) amended the UK Corporate Governance Code (the Code) to ensure coherence with the Section 172 statement. The Department also worked with the GC100, which issued guidance on the practical application of Section 172 to help companies, available on the GC100 website.

Whilst it is still relatively early days for these changes, the Department and the FRC continue to monitor their effectiveness. Early indications are that provision of this information is helping shareholders and stakeholders but more can and should be done. The FRC continues to report annually on the Code.

The Regulations provide for a review after five years. This will include an assessment of the impact of increased transparency on the quality of engagement between companies, shareholders and wider stakeholders and the extent to which large private companies have adopted good corporate governance principles.

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