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In September 2018, London Stock Exchange required all companies on AIM to adopt a corporate governance code for the first time. Of the 900+ companies on the market,around 90% chose to adopt the QCA Corporate Governance Code (the QCA Code).

It is a rare occasion that so many companies in one country adopt a governance code at the same time and the QCA wanted to investigate what companies thought about the process and how it might have helped (or hindered) them.

This is a survey of those AIM companies, with findings from 139 respondents, complemented by results from 15 qualitative interviews with companies and investors.

Read: Corporate Governance on AIM

Key findings

  • 39% of companies say that adopting the QCA Code has helped their business
  • It has done this by:

    • Helping formalise new processes (42%)
    • Encouraging the board to consider other points of view (31%)
    • Making it easier for investors to assess them (20%)

  • As a result of adopting the QCA Code, 40% of companies have disclosed more information to the market. Including on:

    • Board evaluations (40%) and board members skillsets (29%)
    • Strategy and business model (28%)
    • Sustainability measures (13%) and board diversity (15%)

  • 75% of companies regard the disclosure requirements of the QCA Code as “just right”

We are encouraged by what we have found. There is evidence that communication between executives and non-executives is improving within companies as a result of adopting the QCA Code. We also see that it has helped prompt conversations within companies around issues like succession planning that were otherwise not being addressed.

The recommended disclosures in the QCA Code has also led to more information in key areas being made available to investors. The effect that the QCA Code has had on the companies themselves is very welcome and we believe that this will help improve the perception and integrity of small-cap markets in the UK.

The QCA Code was drafted by a group of practitioners from small and mid-cap companies, investors, and other advisors in the sector. The goal was to create a flexible, principle-based code designed specifically for smaller companies on equity markets, but also suitable for private companies, particularly those that are pre-IPO.

We believe that the results of this survey confirm to us that we have created a framework that allows smaller companies, with less resources, to communicate their governance arrangements to stakeholders without being overly burdened with one-size-fits-all prescriptive requirements. This has saved smaller companies precious time and resources that should be dedicated to growth – creating jobs and wealth in the UK and around the world, whilst allowing them to tell their story in a way that suits them.

Read: Corporate Governance on AIM


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