More cut & paste fun

This is from the intro to the UK Government's response to the 2011 EC Green Paper on corporate governance:

Codes can be much more effective at raising standards than law.

For example the formation of audit codes in the UK shows how higher standards can be set by codes. The 8^th Company Law Directive was implemented throughout the EU in 2008, prior to this there was no legal requirement on companies in the UK to have an audit committee, but the UK code recommended audit committees in 1992. In 2003 the code was amended to state that all members of the committee should be independent.

The Grant Thornton survey for corporate governance in 2006 found that 100% of FTSE 350 companies had audit committees, of which 88% were fully independent. A survey commissioned by the FRC in 2006 of 465 small cap companies found that 99% of them had audit committees; and 57% had fully independent committees. This compares well with the Directive’s requirement of at least a single member of the board being independent.

Codes also evolve easily over time and can respond to changing economic circumstances. For example, in the Netherlands, the State Secretary for Economic Affairs established a committee to study the relationship between corporate social responsibility and corporate governance. The committee made specific recommendations which were then adopted by the code. This process began in May 2008 and was completed by the end of the year.

In its response the Government also said

The Financial Reporting Council (FRC) is the UK's independent regulator for corporate reporting and governance, with responsibility for the content of the UK Corporate Governance Code, and will respond in their own right.

They were right. By comparison here is some text from the doc "Effective corporate governance" that the FRC attached as an appendix to its own response to the same consultation:

Codes can be more effective at raising standards than law

.......The history of the formation of audit committees in the UK illustrates how codes can set and achieve higher standards.

Directive 2006/43/EC (the 8th Company Law Directive) requires all listed companies to have an audit committee (or body carrying out an equivalent function) and for at least one member to be an independent director. The Directive was issued toward the end of 2006 and it was implemented in 2008 in most Member States.

Prior to the Directive there was no legal requirement on companies in the UK to have an audit committee, although the UK code recommended audit committees in 1992. The initial recommendation was that all members should be non-executives, of which the majority should be independent. In 2003 the recommendation was changed to state that all members of the committee should be independent.

The Grant Thornton survey for corporate governance in 2006 found that 100% of FTSE 350 companies had audit committees, of which 88% were fully independent. A survey commissioned by the FRC in 2006 of 465 smaller listed companies found that 99% of them had audit committees, and 57% had fully independent committees13. This compares well with the Directive‟s requirement of at least a single member of the board being independent and is just one example of the effectiveness of codes.

Codes evolve easily over time in response to changing economic circumstances 

....

For example, in the Netherlands, the State Secretary for Economic Affairs established a committee to study the relationship between corporate social responsibility and corporate governance. The committee made specific recommendations which were then adopted by the code. This process began in May 2008 and was completed by the end of the year.