Thinking Outside the Box - Eliminating the Perniciousness of Box-Ticking in the New Corporate Governance Code

On 16 July 2018, a new corporate governance code was published. As with previous iterations, it applies on a ‘comply-or-explain' basis, whereby companies are required to either comply with provisions or explain reasons for non-compliance. However, the new code substantially simplified the previous version of the code in an attempt to attenuate the process of ‘box-ticking'. Box-ticking manifests itself in two ways: firstly, by companies complying with the letter rather than the spirit of the provisions, and, second, by companies not utilising the inherent flexibility to implement the optimum firm-specific governance structures by explaining rather than complying. This article will elucidate the history of box-ticking, and the reasons why companies succumb thereto, since Adrian Cadbury pioneered the concept of ‘comply-or-explain' in 1992, before proposing an exclusively principles-driven approach to the corporate governance code which would alleviate box-ticking and fulfill the original aspirations of Cadbury over a quarter of a century ago