The UK Corporate Governance Code

According to the Financial Reporting Council (FRC), corporate governance is about what the board of a company does and how it sets the values of the company and hence, is to be distinguished from the day to day operational management of the company by full time executives.

The revised UK Corporate Governance Code (now referred to as the Code in the currently applicable version) applies to accounting periods beginning on or after 1 October 2014. The Code consists of principles and provisions with the flexibility of a "comply or explain" discretionary approach. It has been enduring and is widely accepted as a guide based on the underlying principles of accountability, transparency, probity and focus on the sustainable success of an entity over the longer term.

Two principal conclusions drawn by the FRC in its review leading to the Code were that more attention had to be paid to following the spirit of the Code as well as its letter and secondly, that the impact of stakeholders in monitoring the Code should be enhanced by better interaction between the Board and its stakeholders.

The Code sets out standards of good practice under the main criteria of Board leadership and effectiveness, remuneration, accountability and relations with stakeholders.

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Complying with the UK Corporate Governance Code

Although the CBI is not a publicly listed company it does where appropriate try to meet the principles of the Code on a comply or explain basis. In 2016 there have been, and are planned, a number of actions to improve CBI compliance with the Code:

  • In 2016 the CBI introduced an induction process for all new non-executive directors and this was applied to David Gavaghan who joined the Board in September 2016;
  • The Code sets out criteria for independence. Non-executive members of the CBI Board are required to advise the CBI if they do not meet thesecriteria and the CBI maintains a register of interests on non-executives this was continued in 2016;
  • Non-executives may take independent professional advice on an issue if thought necessary;
  • The CBI Board does not currently have a senior non-executive director. As the Board composition changes in 2017, this will be re-assessed;
  • The Board has not undergone a process of evaluation, however the Audit Committee was self-evaluated in 2016. There is a planned self-evaluation process for the CBI Board in December 2017;
  • In 2016 the non-executives did not formally assess the performance of the CBI President, there will be a formal review in 2017;
  • Training and development of non-executive directors is not currently reviewed by the President but will be offered via the formal induction process of non-executive directors;
  • The terms and conditions of appointment of non-executives to the CBI Board have been made available for inspection on request.

The Board met formally four times in 2016 and the attendance is as follow:

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