Corporate governance trends in the United Kingdom


Back to Global Corporate Governance Trends for 2024


A shift in the regulatory environment

Expect 2024 to bring continued debate on the challenges of balancing strong governance frameworks and economic competitiveness. While key themes like climate change and diversity, equity, and inclusion (DE&I) remain consistent, we anticipate a deliberate reduction in the overall volume of governance reform initiatives.

The Financial Reporting Council’s (FRC) updated Corporate Governance Code was published January 2024, with over half of the original proposed amendments withdrawn under the guise of easing business burdens. With that update, the FRC’s Stakeholder Insight Group will be tasked with advising regulators on ensuring the right balance between effective governance and reducing unnecessary burdens on companies.  The key addition to the 2024 Code is an enhanced requirement for directors to report on the internal control environment and assure themselves of the quality of internal control and risk management processes.

Legislation enabling the creation of the long-expected Audit, Reporting and Governance Authority (ARGA) was not included in the agenda for the forthcoming Parliamentary session, so while it remains a commitment of both major political parties, it has effectively been postponed. In the meantime, the FRC will encourage adopting new minimum standards for audit committees of premium listed companies, with additional guidelines on the tendering process for external audits, the responsibility for which moves from executive management to the audit committee.


Reinforcing a flexible, principles-based code

2024 will see further discussion on the UK’s principles-based governance code and the extent to which boards feel able or willing to not comply on specific issues. Business leaders continue to call for re-enforcement of the “comply or explain” principle, and the FRC will reiterate its position that the code is intended to be flexible. We anticipate an increase in the number of public companies who decide not to comply on specific issues.

Nonetheless, we expect continued divergence between investment managers, their governance teams, and proxy agencies in their respective approaches to governance compliance. These stakeholders will continue to discuss effective stewardship, with calls on one side for meaningful engagement between asset owner and company leadership and a broad lens on all aspects of company performance, while others continue to use voting as their primary tool to demonstrate their views.  The FRC plans to review the UK Stewardship Code in 2024, undertaking an open consultation in the first quarter.


Enhanced reporting around climate, remuneration, and DE&I

Climate remains high on the agenda, with increased focus on ensuring companies are implementing genuine and action-oriented measures and reporting accurately and transparently. Agencies evaluating ESG performance are expected to become regulated by the Financial Conduct Authority. For asset managers and owners, new sustainability disclosure requirements (SDR) and other ESG-related measures will come into effect in 2024, building on the existing TCFD related disclosure requirements and taking into account the ISSB’s broader sustainability disclosure standards.

Remuneration remains a delicate and socially-charged issue. Boards will need to balance opposing demands of enhancing competitiveness by attracting high-quality international talent, while remaining alert to the local economic environment and social pressures. As the cost of living crisis continues, boards will need to be especially mindful of displaying sensitivity to the disparity between the CEO’s and employees’ financial situations. While UK companies are increasingly adopting ESG metrics into remuneration policy, investors expect these metrics to be measurable, transparent, and aligned with the strategy.

DE&I continues to be a priority, with increased focus on making meaningful and substantive change.  The UK’s financial regulator will announce the result of its diversity and inclusion consultation, which proposes that firms in the financial sector report on a wider range of employee characteristics and explicitly treat lack of diversity and inclusion as a non-financial risk. Pushback on the extent of reporting required is expected, and the proposal is unlikely to survive without amendment. However, the direction of travel remains clear.


Governing in uncertain times

In the context of an upcoming national election, a complex macroeconomic environment, and continued industry disruption, board directors and business leaders will need to demonstrate how they are adapting their corporate strategy and bolstering their resilience to meet these challenges. Should markets open up and corporate finance activity rally, a difficult commercial environment is likely to provide fertile ground for activists. This may be a time for boards to be bold and brave, to draw on the spirit rather than the letter of the governance code, and trust their judgement to do what is right for the business and its stakeholders.


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