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Corporate governance under spotlight at AMBS event

Reform of the UK’s Corporate Governance Code came under the spotlight at a major event co-hosted by Alliance MBS together with the Financial Reporting Council (FRC).

Last year the FRC began a major review of the Code, consulting with businesses and financial investors, and the event in central Manchester heard from a distinguished panel of speakers from across industry.

Konstantinos Stathopoulos, Professor of Accounting & Finance at Alliance MBS, said it was impossible to build a system with all the safeguards required in order to have no corporate failure or scandals, but said the UK Code was highly recognised across the world.

However he said there was a need for the Code to be updated. “New business trends are emerging and there are important issues that need to be debated and which need to inform the new Code. For example, with large private firms choosing not to list their shares in equity markets, and new director responsibilities and duties stretching boards’ ability to be effective monitors, we need to update our thinking and practices from a policymaking and business practice perspective.”

Academic research

Prof Stathopoulos added that it was important to communicate academic research in this field to market participants and policymakers.

“This is exactly what we set out to achieve at the conference, bringing parties together in the same room to debate these issues and trying to be more ambitious about what we want to achieve in terms of the changes to the Corporate Governance Code, while making sure that the end result is something that is theoretically sound and satisfies all market participants.

“Personally, I am really passionate about corporate governance research because we cannot have well-functioning financial markets without corporate governance. We need to make sure that the UK has a leading role in setting out appropriate frameworks of best practice.”

Brexit impact

David Styles, Director of Corporate Governance and Stewardship at the Financial Reporting Council, said this was a really important time for corporate governance in the UK as it leaves the EU.

“We need to make sure our standards of corporate governance remain high and there is a need for reform. As such we need to learn lessons from a wide range of stakeholders, whether that’s from companies, directors or investors. We are asking serious questions. Who is the code for, what is it for, and does it work well enough?”

He added that Alliance MBS had been doing some very interesting work in the area of corporate governance. “This research is of interest to us as we examine the relationship between good corporate governance and long-term company performance, and crucially the relationship between investors and companies.”

Investor view

Sacha Sadan, Director of Corporate Governance at Legal & General, said the corporate governance review was really important to his business. “As one of the country’s largest investors we should input and get involved in trying to improve an already good standard. As a long-term investor we must look at what our clients want. They are asking for better disclosure, more reporting, and a little bit more accountability. All of those things need to be evolved and there are practical steps that asset managers, corporates and regulators can all take.”

He added that ESG (Environment Social Governance) investing is also now much higher up the agenda. “This is mainly because asset owners are saying ‘what are you doing with our money’, ‘how are you looking after it’, and ‘are the companies promoting the higher standards that we are expect these days’.”