FRC launches consultation to overhaul Combined Code

The proposals to amend the code - which will be renamed The UK Corporate Governance Code - include the annual re-election of the chairman or of the whole board; the introduction of external board evaluation reviews and new principles on the board's responsibility for handling risk.

This follows the publication of Sir David Walker's final report on bank pay and governance as shareholders this week - which recommended the changes to the Combined Code and a new Stewardship Code, which will have to be adopted by all institutional investors (PP Online, November 29).

However, while the Walker Review only proposed changing the Combined Code with regards to the banking sector, the FRC said it believed the changes would benefit governance in all major businesses - and had therefore commended a more widespread adoption.

FRC chairman Sir Christopher Hogg said: "The FRC has not found evidence of serious failings in the governance of British business outside the banking sector.

"However, the proposed changes to the code are in our view sensible improvements that would benefit governance in all major businesses. They are therefore commended for widespread adoption through the code."

Hogg explained: "The principal lesson of the financial crisis is that those on boards must think deeply about their individual and collective roles and responsibilities."

Consultation on the draft revised Code ends on March 5 next year.

The FRC said it intends the revised code should apply to all listed companies with a premium listing for financial years beginning on or after June 29 next year.

The FRC said it would carry out a separate consultation with regards to the Stewardship Code recommended by Walker in order to make sure it can be operated effectively.