CUC Code of Governance
The Committee of University Chairs (CUC) has published a revised Higher Education Code of Governance in December 2014. The revision updates and extends the previous version of the Code, reflecting both broader public debates about governance and learning from past failures of governance at individual higher education institutions. Presented using a different format and style, the revised Code marries new content with material retained from the previous version of the Code. Alongside a set of core values, seven primary elements of higher education are identified. Whereas previously to meet the requirements of the Code institutions were asked to ‘comply’ or ‘explain’, they are now asked to ‘apply’ or ‘explain’.
While the role of the Code in supporting good governance is recognised, so to is the need for ‘a set of strong relationships based on mutual respect, trust and honesty to be maintained between the governing body, the clerk to the board, the vice-chancellor and the senior management team.’ The importance of such relationships and examples of how they can be achieved in practice is a recurring theme of our Governor Dialogue series of interviews with chairs of governing bodies.
In the drafting of the Code, the diversity of constitutional forms, institutional histories and scale has been accommodated. As a consequence the Code offers governing bodies the opportunity to meet its mandatory requirements by adopting actions proportionate to the institution's context.
The revised Code does not apply to Scotland where a separate Scottish Code of Good Higher Education Governance applies.
The following actions are suggested for governors seeking assurance that their institution will comply with the revised Code.
- Identify where there are significant changes to the revised Code in comparison to the previous version of the Code.
- Assess whether current institutional practice needs be modified to ensure compliance with the revised Code, or if the practice should be retained and the institution’s actions ‘explained’.
- Implement actions to address those aspects of governance where change is necessary, or having reviewed the illustrative examples listed in the Code improvements to the institution's practice of governance can be made.
UK Corporate Governance Code
The Financial Reporting Council (FRC) has published an update to the UK's Corporate Governance Code in September 2014. Revised every two years, and the new Code applies to accounting periods beginning on or after 1 October 2014. Some of the changes included in the revised Code are:
- Boards are now recognised as having an important role in setting the organisation's culture 'from the top'
- Central to the effective functioning of the Board is a dialogue in decision-making which is both constructive and challenging
- The quality of the discussion at the Board is likely to be assisted by having a diversity of members. This can be as much about having board members who have differences of approach and experience, as well as gender or race. The Code highlights the importance of avoiding 'groupthink'.
- There should be greater focus on the longer-term sustainability of the business
- Renewed attention on risk management and the publication alongside the Code of new Guidance on Risk Management and Internal Control and Related Financial and Business Reporting
- An emphasis on ensuring the remuneration of executives is linked to the longer-term success of the company
The revised Code continues to be based on the principle of 'comply' or 'explain'. The FRC believes this remains an effective alternative to a rules-based system. The chosen approach allows for flexibility in the way a company meets the provisions of the Code, allowing account to be taken of the organisation's specific circumstances.
Although the UK Corporate Governance Code does not apply to high education institutions, changes in the Code reflect, have in the past influenced, thinking on corporate governance generally. Issues that higher education governing bodies might consider include:
- How diverse is the membership of the institution's governing body?
- Does the governing body give sufficient attention to the longer-term sustainability of the institution?
- How recently has the institution's approach to risk management been reviewed?
- Is the remuneration of the executive team linked to the longer-term success of the institution?