FTSE 350 companies beef up corporate governance
Corporate governance is creeping up the leadership agenda of the UK’s largest companies. As the subject becomes more prominent, almost seven-in-ten boards of the FTSE 350 believe they are fully compliant with the Corporate Governance Code, according to Grant Thornton research.
Claire Fargeot, head of governance and board advisory at Grant Thornton UK, said of the findings, “It’s encouraging to see more FTSE 350 companies moving toward full compliance with the Code. Last year’s review highlighted agility and future-readiness. This year, boards need to go further – building governance frameworks that don’t just protect but empower organisations to seize opportunities in a fast-changing world.”
The UK Corporate Governance Code (formerly known as the Combined Code) sets out standards of good practice for listed companies on board composition and development, remuneration, shareholder relations, accountability and audit. Published by the Financial Reporting Council in 2024, following a consultation with the wider professional services sector, the main change is the requirement for a board declaration of the effectiveness of material controls, including reporting controls, in the annual report.
Amid an important transition, Grant Thornton’s 24th ‘Corporate Governance Review’ recorded that 69% of companies claimed they fully comply with the Code, a rise of 4% on the 65% of firms achieving the benchmark in 2024. Of these, FTSE 100 companies accounted for 45%, and FTSE 250 accounted for 55% of the total.
The area of the Code which saw the highest compliance levels was purpose and culture, with 96% of companies clearly articulating their purpose. Similarly, 91% reported a clear set of values for their organisation. Remuneration reporting also fared well, at 91% compliance, with executive and employee pension alignment now almost universal.
However, rates declined in several areas where key discussions are taking place – and this may cause trouble for firms in the future. For example, just 60% found they were compliant on diversity reporting, with gender and ethnic diversity improving but broader diversity remaining underreported. Meanwhile, even as companies reportedly press ahead with AI transformations, compliance on AI and cyber security remain an aspiration rather than a reality – and with many companies adopting a fail-fast approach in these areas, the fact 62% of benchmarked companies still only see AI as an “opportunity” may come back to haunt them – especially in crucial sectors like financial services, where 72% under-report risks, and healthcare, where 89% under-report risks.
Fargeot added, “Technology disruption is reshaping growth models whilst economic shifts are redefining priorities and talent flows are evolving… Cyber risk and AI adoption are now mainstream issues, yet our research shows 55% of boards don’t identify AI as a principal risk, and 22% lack members with tech or data expertise. That will need to change quickly. Expect reporting in these areas to accelerate as organisations recognise their critical role in shaping sustainable success.”
