FRC proposes governance changes

The Financial Reporting Council has published a proposal today aimed at getting opinions on changes to its structure.

The proposals indicate a level of initial consultation that the regulator has already had with a range of stakeholders, and is also supported by government and the FRC council.

Sir Christopher Hogg, after taking over the chair of the FRC on 1st January 2006, undertook one-to-one familiarisation interviews with members of the Board and the Council.

From these discussions three concerns emerged: the unwieldiness of the Council; uncertainty about its impact, except in relation to corporate governance; and whether the FRC’s governance was as compliant as it should be with those of the Code’s principles which could be judged relevant and applicable.

The proposed changes are:
• The FRC’s Board and Council will be merged into a single governing body – the new Board
• The chairs of the FRC’s Operating Bodies will be members of the new Board
• The non-executive members, plus the chairman and the deputy chairman, will form a majority of the new Board
• Only the chair and deputy chair will in future be appointed by ministers
• Members of the new Board will be appointed on their individual merits rather than as representatives of particular interests. The intention is that they should bring to the table a very wide practical experience in reporting and governance, as well as intra-professional understanding, international knowledge and experience, and diversity
• The new Board will have a Committee on Corporate Governance, as the Council does at present, which may include members drawn from outside the Board.

Appointments will be made in line with the principles set by the Office of the Commissioner of Public Appointments.

There will be a Temporary Nominations Committee to manage the transition from the present structure to the new Board.

The FRC is seeking views in particular on:
• The new structure and the proposed transitional arrangements
• The skills and experience required by the new Board
• The assumption that the FRC is, and will continue to be, a market-led regulator.

FRC chairman, Sir Christopher Hogg, said the FRC has an important and complex remit.

'We believe that our proposed new governance structure will enable our work to be more effectively focussed and communicated and, over time, give us a clearer profile both in the UK and internationally.

'The FRC will remain a market-led regulator and will continue to pay close attention to the views of practitioners, particularly investors, businesses and the professions.
'We would welcome views on the proposed new arrangements,' said Hogg.

Further reading:

Consultation Paper on the Governance Structure of the FRC

Act more like a regulator, FRC told