In its annual report considering the impact of corporate governance codes, Baroness Hogg said that while the spring had showed a greater willingness on the part of investors to challenge boards, "genuine stewardship" may suffer if "public confrontation becomes the default mode of engagement."
Overall the report hails success over the last year, finding that 96% of FTSE 350 companies put all directors up for re-election every year, and the majority of these companies will have the effectiveness of their board independently reviewed at least every three years.
The Stewardship Code, set up by the FRC to monitor developments in corporate governance, now has more than 250 signatories including most major institutional investors.
Companies signed up to the code are required to put directors up for re-election every three years, and all listed companies are required to describe their business model in the annual report.
Today's report says there is still a lot of room for improvement however, adding, “Not all governance problems have been solved by any means.
"Two that have been highlighted this year are the perennial question of how to set executive remuneration in a way that is seen as fair reward for good performance, and wider concerns about governance in the banking sector" the report reads. "In both instances the UK Corporate Governance Code operates alongside regulation which the government is in the process of reforming.”
The FRC said it will consider during 2013 whether changes are needed to how the code addresses remuneration, and to the issues surrounding the governance of banks.
Baroness Hogg said, “Companies and investors have responded positively to the changes we introduced in 2010, as they have done consistently in the twenty years since the first corporate governance code was published. In response to further consultation, the 2012 Code focuses on the role of the audit committee - its selection of auditors and how it reports – and asks companies to articulate their policies on boardroom diversity, which many are doing even in advance of the new Code taking effect.
“Meanwhile changes to the Stewardship Code ask investment managers to explain what use they make of proxy advisers, and ask asset owners such as pension funds to reflect their stewardship policies in the mandates they award to managers.”
The report concluldes that although it is encouraged by changes in practice and process, “changes in culture and behaviour, which are ultimately what determine good governance, take longer.”