UK CorporateGovernance Code
Martin Lipton ( Wachtell, Lipton, Rosen & Katz)
The Financial Reporting Council ssued a revised corporate governance code and announced that a revised investor stewardship code will be issued before year-end.
The code and is available here
The revised code contains two provisions that will be of great interest…for U.S. corporate governance codes & … efforts to expand the sustainability and stakeholder concerns of U.S. boards.
Shareholder primacy needs to be moderated / the concept of the “purpose” of the corporation is the guiding principle for the revised code:
Companies do not exist in isolation. Successful and sustainable businesses underpin our economy and society by providing employment and creating prosperity. To succeed in the long-term, directors and the companies they lead need to build and maintain successful relationships with a wide range of stakeholders. These relationships will be successful and enduring if they are based on respect, trust and mutual benefit. Accordingly, a company’s culture should promote integrity and openness, value diversity and be responsive to the views of shareholders and wider stakeholders.
The board is responsible for policies and practices which reinforce a healthy culture and that the board should engage:
with the workforce through one, or a combination, of a director appointed from the workforce, a formal workforce advisory panel and a designated non-executive director, or other arrangements which meet the circumstances of the company and the workforce.
coment : Rick Murray Permalink
Who can quarrel with the virtues of sustainability and long term corporate focus? Actually, anyone familiar with the scope of issues generally labeled as ESG and the even broader scope of the UN’s Millenium Goals that travel on the back of ESG initiatives. Those agendas are on balance more pernicious than supportive of long term shareholder value. As to objectives beyond shareholder value, they have never been established as pertinent to US corporate governance law. Those who believe they should be ought to seek legislative action rather than attempting to control commercial behavior through changes to corporate reporting requirements.