The code could lead to changes round the boardroom table

The new code of corporate governance is designed to prevent Enron-style corporate scandals and to bolster investor confidence.

The reforms include measures aimed at strengthening companies' audit committees and increasing the presence of independent non-executive directors.

Companies not already operating in the prescribed way will have to change their practices or explain why they are not doing so.

Restoring confidence

The new code was drawn up by former investment banker Derek Higgs following a string of corporate scandals in the US, including Enron and WorldCom.

The rules come into effect for company reporting years beginning on or after 1 November.

The measures include:

• A chief executive should not go on to become the chairman of the same firm.

• Strengthening company audit committees to ensure the integrity of their accounts.

• At least half the board in larger listed companies should be independent non-executive directors.

• More open and tougher procedures for the appointment of directors from a wider pool of candidates

Lighter approach

The code is part of the UK listing rules for firms on the stock market, but is applied under a "comply or explain" policy.

This means that if a company does not meet all the requirements it must set out why it has not done so.

This is less severe than earlier proposals put forward that would have made the reforms compulsory.

Barclays recently announced that its current chief executive, Matthew Barrett, would become chairman following a boardroom reshuffle.

The move raised eyebrows as it goes against the code's recommendations.

In its defence, Barclays said it had consulted closely with shareholders before making the decision.

It also said that Mr Barrett had only spent four years at the bank, and that the Higgs proposals were designed to prevent people becoming chairman after spending many years at a firm.