April 26, 2023 Ten years of the QCA Corporate Governance Code
On 1 May 2013, the Quoted Companies Alliance (QCA) formally launched its Corporate Governance Code for small and mid-sized quoted companies. The new code, which built on the foundations of previously established codes for smaller companies, was widely recognised as an industry standard for those companies for which the full UK Corporate Governance Code was not applicable.
Recognising the varied nature of AIM companies, the QCA Code was designed to be flexible and ‘principles-based’; enabling companies to provide a tailored dialogue with their shareholders and others. At the launch of the new code Baroness Hogg, then Chairman of the FRC commented: “the QCA Code rightly emphasises, transparency and engagement with shareholders about how the company is governed can help to attract and retain investment.”
In 2018 the QCA Code was revised to take account of the London Stock Exchange’s requirement for all companies to apply a recognised corporate governance code. This revision set out ten principles of corporate governance based on delivering growth, maintaining a dynamic management framework, and effective communication strategies as a means of building trust.
Drawn up with AIM organisations in mind, the QCA Code revision also looked towards providing other organisations with a strong governance model. As Sir Winfried Bischoff, Chairman of the FRC in 2018, commented “The new principles highlight that having an “efficient, effective and dynamic management framework” will allow companies to deliver growth in long-term shareholder value. This is true for companies of all sizes.”
Marking the ten-year anniversary of the launch of their code, earlier this year the QCA released a report examining the way in which the Code has helped to transform corporate reporting. Undoubtedly there is still some room for improvement. For example, the QCA review revealed that just 14% of companies explained in their reports how directors keep their skills up to date.
Nevertheless, great progress has been seen in multiple areas including governance structures, succession planning, communication and engagement with stakeholders. So much so that from the fifty company reports examined by the QCA, all included an explanation of the company’s business model and strategy, including key challenges in their execution and stating how the board intended to address those challenges. High scores were also seen in areas such as explaining the way in which the company seeks to engage with stakeholders, identifying independent directors, and embedding effective risk management in order to execute and deliver strategy.
To mark the ten-year anniversary, the QCA is currently working on a further update to its Corporate Governance Code. We await its publication with interest.