The FSA, which has responsibility for the UK Listing Authority under the FSMA 2000, says it has not ...
The FSA, which has responsibility for the UK Listing Authority under the FSMA 2000, says it has not yet decided how to put the new Combined Code into practice for listed companies.
The Financial Reporting Council developed the Code on the back of reviews into non-executive directorships by Derek Higgs, and into audit committees by Robert Smith.
In general terms it proposes more transparency in the way directors are appointed, remunerated and policed by companies' own non-executive directors and shareholders.
It also points the way to more professional non-executive directors, and stresses the line between management and boards.
Trade secretary Patricia Hewitt says the new Code will strengthen UK investor confidence, which took a knock after accounting scandals in the US.
However, it may be the case that specific Code rules can only become reality once the UK Listing Authority adopts them in line with the European Directives that ultimately direct its work.
While the FSA says it welcomes the new Code, it remains silent on exactly how it will react, saying simply that it already has been pursuing a listing review due for publication by late September or October.
It has no comment, for example, on how exactly new listing rules can be written to prohibit chief executives from becoming chairmen of the same companies.
This is a point specifically made by the FRC, which says such a rule is needed to "reinforce the separation of the roles of chairman and chief executive".
This will come as difficult news for a large number of UK firms – some FTSE 100 listed ones even – where the unofficial carrot of elevation to the chairman's role is crucial to retaining top executives.
Such a rule also raises questions about how the fast-growing number of foreign, particularly European, firms obtaining secondary listings in London will react.
Does it mean, for example, that major German companies with not one but two boards, as is practice, will be forced to choose between a UK listing or telling successful chief executives that they cannot follow their predecessors.
Right now, the FSA is not saying either way.
Trade associations, on the other hand, have been far more vocal in their responses.
The NAPF, which has already been claiming boardroom scalps in recent months by using new rules designed to boost shareholder activism at annual general meetings, says the new Combined Code will make boardrooms better and more responsive to shareholder demands.
The AITC says it is pleased the Code has recognised the particular make-up of investment trust boards, which tend to be dominated by non-executive directors.
"[It] means some of the standard provisions of the code will be inappropriate. This is important as the sector, with over three hundred and seventy listed companies is the largest single sector on the stockmarket," it says.
The ABI is slightly less enthusiastic, saying that the Code represents a "constructive way forward", but that it would still like to see "stronger representation for investors on the Financial Reporting Council"
The London Stock Exchange says it welcomes the "principles-based approach" of the Code.
The FRC says the new Code comes into effect for companies with reporting years starting on or after 1 November this year.
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