Make Comply or Explain Mean Something
Draft a meaningful comply-or-explain statement with rationale, risk, mitigation, and timeline.
Comply-or-explain is not a loophole. It is a transparency trade. The bargain A code can allow flexibility because companies differ in size, complexity, ownership, geography, and moment. But flexibility has a price: the explanation must be specific enough for shareholders and stakeholders to judge whether the alternative still upholds good governance. The five-part explanation Use five parts. Background: what circumstance creates the departure. Rationale: why the chosen approach is better now. Risk: what governance concern the provision normally protects against. Mitigation: what the board is doing to manage that concern. Timing: when the board will review or return to compliance.…
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