Corporate governance is the way in which organisations are directed and controlled. Good corporate governance is vital to effective financial and risk management. The corporate governance code draws on best practice in the public, private and charity sectors. The code incorporates the protocol on enhanced departmental boards, which sets out government policy in this area. Significant changes include the requirement for the Secretary of State to chair the departmental board and a board composition that enhances the role of non-executive board members bringing knowledge and experience from senior positions in large and complex organisations outside government. The code provides for a ‘comply or explain’ approach, whereby a department can depart from the code’s provisions provided the reasons are explained in its annual governance statement accompanying the department’s accounts. The guidance is optional and does not require compliance or explanation. The principles outlined in the code will also prove useful for other parts of central government and they are encouraged to apply arrangements suitably adapted for their organisation. The code and guidance are intended to be living documents and will evolve as practice develops.