Corporate governance for firms


Board and group structure

Boards and senior managers are increasingly having to put risk-management and personal accountability at the forefront of how firms are run.

- The FSA is extending the approved persons regime by introducing more and more specialised controlled functions, including a new CF00 function which will apply to certain personnel in holding companies. Firms will need to review their internal reporting lines to ensure they have the correct approvals in place. The FSA is also introducing a new requirement that firms actively consider whether they need a board level risk committee.

- The FSA’s proposed changes for governance at regulated firms are being introduced against a backdrop of change at European and International level.

  • Click here for a summary table setting out the key developments in the UK, Europe and internationally.
  • Click here for extracts from the IAIS/OECD issues paper on corporate governance - this document contains a link to the paper itself.


Increasingly, NEDs will be expected to police internal risk-taking and it will be up to firms to ensure that they are given the right support and resources to do this. With the increased focus on the competence and qualifications of NEDs to hold their positions, firms will also need to make sure that they are appointing the right people to the job.

For more on the role of NEDs and how the changes in corporate governance regulation affect NEDs, click here to enter the NEDZone.


What regulated firms pay their senior managers has, increasingly, become ‘public property’, with bankers’ bonuses hitting the headlines in the wake of the financial crisis. Banks have already seen their bonuses taxed, and firms can expect enhanced disclosure requirements and increasing scrutiny by regulators of their remuneration structures.

The FSA has published the final version of its revised Remuneration Code (the “Code”) affecting pay for many firms in the financial sector. The new Code rules are contained in SYSC 19A and came into effect on 1 January 2011, although there are a limited number of transitional provisions. As anticipated, the new Code has been brought into line with the final guidance from Committee of European Banking Supervisors (CEBS). The FSA has also provided clarification in a number of areas, and has issued a paper on “proportionality” giving further guidance on how particular firms – captured within the wide spectrum of those in scope – are expected to comply with the Code requirements. Click here for our full analysis of the Code and disclosure provisions, with a step-by-guide on how to determine whether the Code applies to your firm and what issues you need to consider if it does.

More shareholder involvement

Having been accused of not taking enough responsibility for the management of the companies they own, investors are coming under increased pressure to get involved in corporate governance. The FSA wants to see boards facing challenge from this quarter and is encouraging major shareholders to start holding directors more accountable for their decisions.

- Click here for a summary table of the key changes affecting corporate governance, including the Stewardship Code Sector-specific governance rules.

Those operating in particular sectors may face additional sector specific corporate governance requirements – for example:

- Insurers have Solvency II rules and some life offices also have “with profits” governance.

- Remuneration governance is appearing in various sectoral legislation such as the Alternative Investment Fund Managers Directive and the FSA Remuneration Code.

Tougher enforcement

The FSA is determined to get tough on corporate governance. As well as being a key focus of supervision and a key issue for ARROW visits, it will also be an area where the new tougher enforcement will apply, with higher fines for both senior management and for firms.

- Click here for details of the FSA’s financial penalties regime, introduced earlier this year, which could see firms and individuals receiving fines of up to three times more than previously.

How can we help?

We are well-placed to assist firms with reviewing their corporate governance practice and ensuring that they are meeting their obligations. We offer a governance ‘health check’ for regulated firms, and audits of company structures and terms of appointment to ensure compliant governance. We also offer training and briefings to board members on governance issues.

Please email Simon Morris for further details.

We also have a programme of seminars on the latest corporate governance developments and issues – click here to view our calendar of forthcoming events.

Useful materials

Click here for a summary of the proposals put forward in the Walker Review and how these are to be implemented, and here for the FSA’s summary of how it has implemented the Walker recommendations (page 51).

Click here to access our corporate governance planning tool.

Sources, publications and news

If you would like to look at the topic in more detail, follow the sequence of developments or read the underlying publications, click here to access our daily monitoring reports on this subject - starting with the most recent; each report contains a summary and a hyperlink to the publication concerned.