UK’s FRC Re: “What Constitutes an Explanation Under ‘Comply or Explain'”

Excerpts from article in Audit and Risk –

The UK’s corporate reporting regulator has set out a number of considerations that companies should bear in mind when disclosing why they do not comply with parts of the Corporate Governance Code.

The FRC says that non-compliance disclosures should set out the background as to why the company has not followed the Code, and provide a clear rationale that is specific to the company.

The regulator also says that companies should indicate whether the deviation from the Code’s provisions is limited in time, and that they should state what alternative measures the company is taking to deliver on the principles set out in the Code and mitigate any additional risk.

The current governance debate in Europe has raised questions about the operation of “comply or explain”.

Article

http://auditandrisk.org.uk/news/companies-warned-about-comply-or-explain

FRC's Report

http://www.frc.org.uk/images/uploaded/documents/FRC%20explanations%20paper%200301121.pdf

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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