The regulator said changes to the 2018 UK Corporate Governance Code “raised the bar considerably” and have led to some high-quality reporting.
However, greater focus is needed on longer term sustainability including stakeholder engagement, diversity and the importance of corporate culture.
Additionally, FRC CEO Sir Jon Thompson said concentrating on achieving “box-ticking compliance”, at the expense of effective governance and reporting, is “paying lip service to the spirit of the Code”.
He added this does a “disservice” to the interests of shareholders and wider stakeholders, including the public.
Thompson added: “While there are examples of high‑quality governance reporting from ‘early adopters’, looking ahead we expect to see much greater insight into governance practices and outcomes reporting on a range of key issues from diversity to climate change.
“Where companies depart from the Provisions of the Code they need to provide compelling explanations for why non-compliance is the right approach for their particular company.”