The UK Corporate Governance Code allows companies to ‘comply or explain’, meaning they can depart from certain provision if they clearly explain why a different approach works better for them.
The problem is for too long ‘comply and explain’ has been misconstrued as ‘comply or else’, says Richard Moriarty., FRC CEO.
He worries many companies have come to believe the safest course is simply to follow every provision of the Code and avoid departures altogether. “That misses the point of the UK’s governance framework,” said Moriarty.
He continued:“The Code was deliberately designed to give boards flexibility to make decisions that work for their company and their shareholders, and to explain those decisions clearly. A thoughtful, well-reasoned explanation is just as valuable as compliance.
“Boards should feel confident using that flexibility. Good governance comes from boards thinking from themselves and explaining their judgement, not box-ticking compliance.”
The FRC has published updates guidance aimed at helping investors, proxy advisers and other users of corporate reporting better understand how companies apply the Corporate Governance Code. More detail is available on the FRC website: The narrhttps://www.frc.org.uk/news-and-events/news/2026/03/frc-publishes-guidance-to-help-investors-and-advisors-recognise-the-value-of-flexible-governance-reporting
