To What Extent the UK Corporate Governance Code Can Regulate Companies Through the Comply or Explain Approach.

Abstract

The primary objective of this research is to examine the extent to which the UK corporate governance code can regulate companies through the ‘comply or explain’ approach. The study adopted a qualitative research design to address the research question under investigation. It used secondary data collected from published sources. The findings add new knowledge to the existing body of research highlighting the role of corporate governance in regulating companies through the “comply or explain” approach. The study used thematic analysis to establish the themes, patterns, and trends.The finding revealed that the “comply or explain” code is effective since it provides companies with flexibility owing to their varied sizes and organization structure; however, there are deficiencies that should be fixed with workable reforms. The review noted that abolishing the corporate governance code will erode strides made in the management of firms in the UK, which are competitive. The study concluded that a workable reform is critical in addressing the deficiencies such as poor quality of statements and reduced involvement of shareholders on the published statements on compliance to corporate governance code. The study recommended increased awareness and publicity of the “comply or explain” code, empowerment of shareholders to focus on explanations for non-compliance and development of web-based monitoring system managed by a monitoring agency. These recommendations underscore the need for promoting flexibility in the “comply or explain” code, enhancing competitiveness of UK firms, and promoting effective corporate governance to spur the economy.