Paper P3 performance strategy: the UK's corporate governance code has been revised--and it features a number of significant changes of emphasis that are relevant to P3.

Position:Study notes

The UK's revised guidance on corporate governance matters came into force for accounting periods starting on or after 29 June 2010. The most obvious revision is that the document's full title is now "The UK corporate governance code". Previously it was called "The combined code on corporate governance". This change is probably intended as a reminder to non-UK companies listed on the London Stock Exchange that some provisions apply to them. The P3 syllabus is not country-specific. Most of the issues arising in corporate governance are common to any setting where shareholders delegate the management of their investments to a board of directors, so the content of the new code should be treated as a credible guide to good governance generally.

The P3 paper may include questions that are inspired by the code, while suggested answers may refer to it in support of any assertions made. This does not mean that you should memorise the document. Exam questions will not test your ability to reproduce chunks of text. The code offers advice on specific matters and is not intended as a detailed check list. Questions at this level should reflect the real world and the code is only one source of guidance. But it is worth reading in detail, of course, and it can be downloaded free from the Financial Reporting Council (FRC) website ( Although it covers 35 pages, the document is laid out in such a way that there's a lot of blank space, so getting through it is not a major task.

There is another document on the FRC's site that's well worth reading: a report entitled "Revisions to the UK corporate governance code" highlights the changes that have been introduced. Most interestingly, it covers areas where problems have arisen in practice, thereby providing an idea of the most important and contested issues. The code, which was written as a response to the corporate scandals that occurred in the 1980s and 1990s, is fundamentally a practical document designed to deal with the tensions that have been shown to create problems. Its name has changed over the years (it was originally the Cadbury report) and it has been supplemented by parallel documents such as the Turnbull guidance on risk management and internal control, the FRC's guidance on audit committees and the Higgs report (under review at the time of writing), which provides advice for non-executive directors.

The code has five main sections, covering leadership, effectiveness, accountability...

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