The Combined Code on Corporate Governance (‘the Code’) is being published by the Financial Reporting Council (FRC) to promote confidence in corporate reporting and governance as well as to support its following outcomes, namely:- (i) contribution of good corporate governance towards better performance of company by helping a board discharge its duties in the best interests of shareholders; (ii) facilitation by good governance for efficient, effective and entrepreneurial management that can deliver shareholder value over the longer term; etc. The Code is not a rigid set of rules, rather it is a guide to the components of good board practice distilled from consultation and widespread experience over many years.

The 'Code on Corporate Governance' published in the year '2008' has provided several principles relating to various sections like Board of Directors, Chairman and Chief executive of Company; Remuneration Policy; Accountability and Auditing (Financial Reporting and Internal Controls); as well as relations with shareholders; etc. These principles majorly include:-

• Every company should be headed by an effective board, which is collectively responsible for the success of the company. The board’s role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed. It should set the company’s strategic aims, ensure that the necessary financial and human resources are in place for the company to meet its objectives as well as review management performance. It should set the company’s values and standards and ensure that its obligations to its shareholders and others are understood and met.
• All directors must take decisions objectively in the interests of the company. The board should meet sufficiently regularly to discharge its duties effectively. There should be a formal schedule of matters specifically reserved for its decision.
• The annual report should identify the chairman, the deputy chairman (where there is one), the chief executive, the senior independent director and the chairmen and members of the nomination, audit and remuneration committees. It should set out the number of meetings of the board and those committees and individual attendance by directors. It should include a statement of how the board operates, including a high level statement of which types of decisions are to be taken by the board and which are to be delegated to management.
• There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one individual should have unfettered powers of decision.
• The board should include a balance of executive and non-executive directors (and in particular independent non-executive directors) such that no individual or small group of individuals can dominate the board’s decision taking.
• There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board. Appointments to the board should be made on merit and against objective criteria. Care should be taken to ensure that appointees have enough time available to devote to the job.
• The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge. They should have access to the advice and services of the company secretary, who is responsible to the board for ensuring that board procedures are complied with.
• The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. The board should state in the annual report how performance evaluation has been conducted.
• All directors should be subject to election by shareholders at the first annual general meeting after their appointment, and to re-election thereafter at intervals of no more than three years. The names of directors submitted for election or re-election should be accompanied by sufficient biographical details and any other relevant information to enable shareholders to take an informed decision on their election.
• Levels of remuneration should be sufficient to attract, retain and motivate directors of the quality required to run the company successfully, but a company should avoid paying more than is necessary for this purpose. The performance-related elements of remuneration should form a significant proportion of the total remuneration package of executive directors and should be designed to align their interests with those of shareholders and to give these directors keen incentives to perform at the highest levels. Levels of remuneration for non-executive directors should reflect the time commitment and responsibilities of the role.
• The board should, at least annually, conduct a review of the effectiveness of the group’s system of internal controls and should report to shareholders that they have done so. The review should cover all material controls, including financial, operational and compliance controls and risk management systems.
• The board should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the company’s auditors.
• The chairman should ensure that the views of shareholders are communicated to the board as a whole, as well as discuss governance and strategy with major shareholders. The senior independent director should attend sufficient meetings with a range of major shareholders to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders. The board should keep in touch with shareholder opinion in whatever ways are most practical and efficient.
• The board should use the Annual General Meeting (AGM) to communicate with investors and to encourage their participation.
• Institutional shareholders should enter into a dialogue with companies based on the mutual understanding of objectives. When evaluating companies’ governance arrangements, particularly those relating to board structure and composition, institutional shareholders should give due weight to all relevant factors drawn to their attention. Most importantly, they have a responsibility to make considered use of their votes.
  

^ Top