The Financial Reporting Council on 5 December published proposals for a revised U.K. corporate governance code to reflect the changing business environment and help U.K. companies achieve the highest levels of governance.

After engaging with several stakeholders and incorporating suggestions from the government’s green paper on Corporate Governance Reform, the new code is shorter and sharper and builds on the findings from the FRC’s Culture Report published in 2016. “The revised code focuses on the importance of long-term success and sustainability, addresses issues of public trust in business, and aims to ensure the attractiveness of the U.K. capital market to global investors through Brexit and beyond,” FRC stated.

FRC Chairman Sir Win Bischoff said in a statement: “At this critical time and as the country approaches Brexit, a revised Code will be essential to restoring trust in business, attracting investment, and ensuring the long-term success of companies for members and wider society.”

“A principle promoting the importance of the intrinsic value of corporate culture is a new addition to the code,” Bischoff said. “Building trust in business has to start in the organization, and forming a healthy corporate culture is integral to the credibility of a company.”

“Engaging with and contributing to wider society must not been seen as a tick-box exercise but imperative to building confidence among stakeholders and in turn the long-term success of a company,” Bischoff added.

According to the FRC, the revised Code sets out good practice, so that the boards of companies can:

Establish a company’s purpose, strategy and values and satisfy themselves that these and their culture are aligned;

Undertake effective engagement with wider stakeholders, to improve trust and achieve mutual benefit, and to have regard to wider society;

Gather views of the workforce;

Ensure appointments to boards and succession plans are based on merit and objective criteria to avoid group think, and promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths;

Be more specific about actions when they encounter significant shareholder opposition on any resolution, including those on executive pay policies and awards; and

Give remuneration committees broader responsibility and discretion for overseeing how remuneration and workforce policies align with strategic objectives.

The revised code has five sections:

Leadership and purpose;

Division of responsibilities;

Composition, succession and evaluation;

Audit, risk and internal control; and

Remuneration.

Most changes, the consultation paper states, have been made to the first three sections of the current code, which broadly correlate to Sections A (Leadership) and B (Effectiveness). Section E (Relations with shareholders) has been integrated within the revised code, as shareholder engagement is a key aspect of good governance.

“Section 4, which deals with audit, risk and internal control, remains largely unchanged,” the consultation paper states. “This section is closely linked with legal and regulatory requirements, and, in the case of the role of audit and audit committees, the code was amended recently. The current Schedule A has been removed and where appropriate incorporated into the Section 5 (Remuneration).”

“Firms that are alive to the concerns of their workers and shareholders see the benefits on their bottom line, and the Financial Reporting Council’s proposals will ensure our largest companies benefit more from the experience of their workforce, suppliers and customers,” said Business Minister Margot James. “This will ultimately help them to achieve long-term success by strengthening corporate accountability and build on our reputation as a world-leading business environment—a key foundation of our Industrial Strategy.”

The revised code builds on an updated set of principles emphasising the value of good corporate governance to the sustainable growth of a company. “By applying these principles, following the more detailed provisions, and using associated guidance, companies will be better able to report how their governance structure contributes to its long-term success and achieves wider objectives,” the FRC said.

The code is supported by the revised Guidance on Board Effectiveness. The consultation also includes questions to inform the future direction of the U.K. Stewardship Code, which will be published for consultation in late 2018.

Responses to the consultation should be sent to codereview@frc.org.uk by 28 February 2018.

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