Blogs

Derek Bishop

Director

Setting the tone

Date added: 19th Sep 2014
Category: Leadership

In releasing is revision to the Corporate Governance Code the Financial Reporting Council (FRC) has taken the chance to highlight their expectation that board directors will take the lead in setting the correct tone for the company.

In releasing is revision to the Corporate Governance Code the Financial Reporting Council (FRC) has taken the chance to highlight their expectation that board directors will take the lead in setting the correct tone for the company.  In the preface to the code revisions the FRC says that “One of the key roles for the board includes establishing the culture, values and ethics of the company.”  It goes on to call on directors to set a good example and to ensure that good standards of behaviour permeate throughout all levels of the organisation.

With directors leading the way in ethical behaviour the FRC believes that it will help to “prevent misconduct, unethical practices and support the delivery of long-term success.”  The body of the code expands on these initial principles by setting out expectations of leadership, effectiveness, accountability, remuneration and relations with shareholders.  For example, when it comes to leadership the FRC expects the board to provide entrepreneurial leadership and to set strategic aims, values and standards.

The FRC also emphasised its belief that to be effective, the debate within a board must be constructive and challenging.  Whilst the FRC accepts that diversity is not in itself a guarantee of challenging debate it does highlight the need for diversity in terms of terms of race or gender as well as approach and experience.  The FRC intends to consider diversity as part of board succession planning when it approaches its next code update in 2016.

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