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The Financial Reporting Council’s (FRC) latest review of the Combined Code on Corporate Governance has concluded that the UK's Combined Code, devised in the wake of the Enron scandal in 2003, is working reasonably well and there is no need for major changes at present. However, the FRC emphasises that there is room for improvement in the way it is applied by companies, investors and intermediaries.

The FRC also proposes to allow the chairman of a smaller listed company to be a member of the audit committee where he or she was considered independent on appointment.

The FRC launched a review of the code in April, after complaints that its implementation in practice amounted to little more than box ticking in firms outside the FTSE100 and that the Code failed to treat individuals as grown-ups.  

Announcing the findings of the review Sir Christopher Hogg, chairman of the FRC, said: “We have concluded that there is no need or demand for significant changes to the Code at this point, and are therefore proposing only limited amendments."

“However there is no room for complacency. While respondents strongly endorsed the flexible “comply or explain” approach, it is clear that it is not always applied as intended. All parties share responsibility for ensuring it remains an effective alternative to regulation – companies by providing robust explanations when they choose not to follow the Code, and investors and their advisors by assessing each explanation on its merits rather than applying a rigid set of rules.”

Consultation on the proposed amendments will begin in November. If agreed, a revised Code will come into effect in June 2008 at the same time as new FSA Part 6 Rules (which include the Listing Rules) implementing new EU requirements on corporate governance.

The Financial Reporting Council is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. 

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• Financial Reporting Council