Identify how a UK company could convince shareholders and the Essay

Identify how a UK company could convince shareholders and the regulator that it had complied with the five main principles of the UK Corporate Governance Code - Essay Example More importantly, their neutrality and lack of vested bias should be illustrated their lack of previous/present personal/professional connections. By satisfactorily adhering to this principle, a UK company can convince shareholders and the regulator about its compliance with the Code. The second main principle relates to executive remuneration. The growing discontent with the trend of exorbitant top-executive compensation has brought the issue to the notice of Financial Reporting Council. Consequently, the principle of ‘performance related pay’ is included in the Code, whereby the rules already stated in the Companies Act of 2006 will be enacted more effectively. The principle also suggests the ideal composition of the remuneration committee, where non-executive directors will play a major role, especially in ascertaining director remuneration. Another key principle set out in the Code is Accountability and Audit standards. It is suggested that only independent non-executive directors are appointed to the Audit Committee. This makes sense in the context of some major corporate scandals across the Atlantic, where conflict of interest for members of the audit committee can lead to disastrous consequences for shareholders. The fourth main principle concerns the role played by institutional investors. The salience of this principle arises from the fact that the UK is a major financial hub in the world and ethical investment/trading practices are imperative to uphold the integrity of the system. Hence all companies (especially those in the financial sector) in the UK should comply with the guidelines given in the Code. Finally, another key principle in the Code is regarding shareholder relations. Under this section, best practices and recommendations for maintaining a strong and honest relationship with shareholders are given. The principle has at its core the need for shareholders