comply or explain definition
comply or explain approach means that corporate governance principles and codes are advisory, and therefore must not necessarily be complies with. However, a company that has chosen not to comply with any one or other rule is required to provide a reasonable explanation for doing so. Both the application of the rule and the provision of a substantiated explanation as to why it has not been applied represent two ways of complying with the rule. In the event of a company’s failure to provide a proper explanation, or the explanation provided being insufficient, the company may be punished.
comply or explain principle means that the adoption of the codes is voluntary but the company should explain in their annual reports why they have not adopted the codes (Coombes and Wong, 2004; Solomon, 2010). While the Sarbanes-Oxley Act is rules- based pronouncement of US parliament and not a code, the UK reforms are principles- based (Solomon, 2010). European countries adopt “comply or explain”, codes, and OECD principles more than any country of the world (Becht et al., 2005). Countries preference for codes is because of its suppleness as it is not possible to alter the law always (Coombes and Wong, 2004). This explains, Coombes and Wong (2004) argue, why many countries, including the US are embracing “comply or explain” principles-based code of UK. The next section examines governance in Africa.
comply or explain means that advisers and investors have an obligation to weigh up explanations for non-observance of the guidelines.
More Definitions of comply or explain
comply or explain means that both purchasers and suppliers can – in their “declaration of fair relationships between suppliers and purchasers” – provide derogations to the recommendations of this code as long as they clarify their policy on the matter.
comply or explain requirement means listed firms need to report on the “comply or explain” provisions in the ESG reporting guide. If the listed firm does not report on one or more of these provisions, it must provide reasons in its ESG report. These provisions have been upgraded to mandatory reporting for financial years commencing on or after July 2020.
comply or explain means that the entity shall endeavor to comply with the provisions and achieve full compliance by March 31, 2023. In case the entity is not able to achieve full compliance with the provisions, till such time, it shall explain the reasons for such non- compliance/ partial compliance and the steps initiated to achieve full compliance in the quarterly compliance report filed under Regulation 27 (2) (a) of LODR regulations.
comply or explain principle. This means that the company does not have to follow every rule in
comply or explain works well and on the whole means that there Is a measured approach.”
comply or explain principle, which means that the UK Corporate Governance Code is voluntary although listed and public interest entities must report on non-compliance and explain why the code has not been followed.
comply or explain approach. This means that entities applying this Manual must either follow the stated best practice or else provide a full explanation in their report for their preferred alternative. It is expected that a reporting entity would not provide a ‘comply or explain’ disclosure only in exceptional circumstances. The comply or explain approach should only be taken where specified in the guidance, and never applied in place of a mandatory requirement.