Thirty Years and Done – Time to Abolish the UK Corporate Governance Code

Abstract

A 1992 Code of Best Practice developed by a committee Sir Adrian Cadbury chaired revolutionised UK corporate governance. The Code, which introduced non-statutory best practice provisions with which listed companies could choose not to comply so long as they explained why, has evolved into the more expansive UK Corporate Governance Code of today. This paper argues that after three decades it is time to do away with the code approach and ‘comply-or-explain’. Much of the current Code’s content is now irrelevant, and disclosure and compliance expectations have escalated to levels that create substantial net costs for companies. Additionally, the Code is now being used to address ‘stakeholder’ issues for which the Code’s shareholder enforcement dependent comply-or-explain mechanism is poorly suited. The Code correspondingly should be abolished, with some key points it addresses being dealt with instead by new disclosure requirements under the Financial Conduct Authority’s Listing Rules.

Keywords: Corporate governance, UK corporate governance code, Cadbury Code, London Stock Exchange, Listing Rules, Stakeholders

JEL Classification: G18, G30, G34, G38, K22