What reporting tells us about governance and how it will evolve

Uncover the latest board governance trends and their likely evolution

In this series of reports, published in 2021, we focus on what narrative reporting tells us about board governance practices in the UK. We also explore their likely evolution in light of the UK Government’s reform proposals, a shift towards stakeholder capitalism, a broadening focus on planet and people, and the ongoing impact of the COVID-19 pandemic.

Analysis is presented in three parts:   

1. The board
   
2. The audit committee
   
3. The nomination and remuneration committees

Findings are evidenced with reporting examples based on EY’s review of more than 100 FTSE 350 annual reports and accounts (ARAs), investor quotes and additional external research. These publications will be useful for directors when they are debating their roles, their forward rolling agenda and their effectiveness.

The range of topics that fall under the board’s remit continues to increase, as do the expectations about the extent of directors’ oversight.

In this report – dedicated to the board – we cover:

• Board committee trends

• Governance over social, environmental and other sustainability matters, including climate change

• Evolving expectations regarding the board’s involvement in strategy and risk oversight

• A focus on increasing transparency of governance-related disclosures

The responsibilities of audit committees (ACs) are ever expanding. Not only has the complexity of matters within their usual remit increased, but ACs also find themselves with responsibilities in new areas – sometimes linked to their traditional role, but also purely because a topic ‘needed a home’ and doesn’t fit the agendas of other board committees. Looking ahead, the UK Government’s proposals to reform corporate governance and audit will increasingly impact audit and risk committees.

In this report – dedicated to audit and risk committees – we cover: 

• Governance trends impacting the role and responsibilities of the audit and risk committees.

• ‘No regret’ actions that ACs can start taking now, regardless of the outcomes of the Government’s reform proposals, to help prepare for the change that is coming e.g., steps to help with drafting an audit & assurance policy or enhance resilience reporting.

Changes to the 2018 UK Corporate Governance Code, alongside evolving societal expectations – especially in respect of diversity and inclusion (D&I) and social equality – created a clear momentum for directors to increase oversight over workforce-related matters. This impetus has only grown stronger with the pandemic.

In this report – dedicated to nomination and remuneration committees – we address:

• The oversight of human capital and matters related to people and culture, with a focus on the evolving roles of the nomination and remuneration committees. 

• The rising investor expectations in this space and how various regulatory changes, including those proposed by the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Bank of England around D&I, will impact organisations.

Find out more

In our 2020 report we attested that change within the governance and reporting arena – and adapting to it – seems to be set as a constant fixture for some years to come. This is now truer than ever given the events of the last 18 months and the Government’s future agenda. This series of publications will help you as you navigate a changing landscape. Please contact the team if you would like to discuss any of the topics covered.

If you’re looking for insight on broader narrative reporting, our September 2020 report (From intent to action) remains relevant. The only new narrative reporting requirement applicable for 31 December 2021 year ends relates to companies’ disclosures against the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD) which we address in our ‘Towards TCFD compliance’(pdf) report.