May 2009

Reflecting feedback from a variety of Primary Listed, Main Market companies and their advisers, the London Stock Exchange has responded to the FRC's call for evidence as part of their review of the effectiveness of the Combined Code, stressing that the Code has a direct bearing on our markets as all UK-domiciled, Primary Listed Main Market companies are required to report on their application of the Code.

 

In our response, we note that the current economic conditions have tested the effectiveness of the Code, and propose suggestions for improving the operation of the Code. However, we also reinforce the success of the principles-based, 'comply or explain' approach and we encourage the FRC to consider this review within the broader market context, particularly in relation to:

• the international response to the financial crisis, which is based not on an assumption that corporate governance has failed across all sectors, but instead focuses on classifying and reviewing systemic risk in certain areas of the financial sector only;
• the wide variety of companies that employ the Code, nearly half of which are smaller companies where the effect of unnecessary additional regulatory burden will have a disproportionate impact;
• the important role the Code has played in contributing to the competitive position of London as a leading financial centre and will continue to play when recession turns to recovery.