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. Like 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 firstly, by companies complying with the letter rather than the spirit of the provisions, and, second, by companies not utilising the inherent flexibility of the code to implement their optimum firm‐specific governance structures by explaining rather than complying. This article elucidates the history of box‐ticking, and the reasons why companies succumb to it, 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.