A stakeholder survey on the corporate governance, reporting and effectiveness of the UK Financial Reporting Council (FRC) has called for more transparency from the UK regulator.
Many of the 297 senior stakeholders surveyed, including investors, directors, non-executive directors, auditors and professional bodies, responded that although improvements have been made, they wanted greater transparency from the regulator regarding processes, decision making and outcomes. The report on the survey results stated that as the FRC holds others accountable, it needs to hold itself accountable to these same measures.
Surveyed stakeholders want the FRC to become more outcomes-orientated and less process-driven through improved communication and strategic resourcing, because the FRC’s current remit is too broad. Yet, 69% of stakeholders found that the communications from FRC is effective, with 25% stating it is ineffective.
The survey was conducted by ComRes, a research consultancy specialising in corporate reputation, and its associate director Meghan Oliver said: “Arguably there is room for more transparency of the FRC’s disciplinary investigations and communications. Some critics have voiced concerns in the media over investigation outcomes and conflicts of interest within the FRC.”
However the survey showed that 80% of stakeholders consider the FRC to be independent of the audit profession.
Nevertheless in recent months the FRC was criticised for being a “toothless watchdog”. But half (51%) of stakeholders feel the stringency of enforcement activities is ‘about right’, but auditors in particular found the FRC too stringent (40%), while institutional investors found them not stringent enough (45%).
The majority of stakeholders (53%) found that maintaining professional standards was the most important of the FRC’s objectives, followed by regular monitoring of standards (27%) and enforcement of standards (20%).
According to the FRC, a new sanctions review regime will be implemented following the results of an independent review of the current regime. The new regime will aim to balance enforcing standards and encouraging business to improve audit processes and corporate reporting quality.
Although the UK Corporate Governance Code was commended as a global standard, constant small revisions were flagged by stakeholders as cumbersome with unclear value. Stakeholders would like corporate reports to be shortened for relevance and the FRC stated it would consider that as part of its review.
The report suggested that expansion of the stakeholder list in future surveys could provide useful insight into progress made.