A coalition group chaired by James Wates (and including the FRC, the CBI and others) has published for consultation a draft set of corporate governance principles with supporting guidance.
Large private companies may choose to adopt these principles as a code for making a statement of corporate governance arrangements under the new reporting regulations. (See New corporate governance narrative reporting requirements for companies published.) More widely the principles may help all companies (not just those that fall within the new statutory regime) to understand and apply effective corporate governance.
The coalition group expects that companies adopting the principles will apply them fully and use an "apply and explain" approach. A published supporting statement for each principle will give additional visibility over corporate governance processes. Note that the principles do not override or interpret directors' duties, and directors should continue to comply carefully with their duties in the usual way.
Final principles and guidance are to be published in December 2018.
Wates Corporate Governance Principles for Large Private Companies
- Purpose: an effective board promotes the purpose of a company, and ensures that its values, strategy and culture align with that purpose.
- Composition: effective board composition requires an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the company.
- Responsibilities: a board should have a clear understanding of its accountability and terms of reference. Its policies and procedures should support effective decision-making and independent challenge.
- Opportunity and risk: a board should promote the long-term success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.
- Remuneration: a board should promote executive remuneration structures aligned to the sustainable long-term success of a company, taking into account pay and conditions elsewhere in the company.
- Stakeholders: a board has a responsibility to oversee meaningful engagement with material stakeholders, including the workforce, and have regard to that discussion when taking decisions. The board has a responsibility to foster good stakeholder relationships based on the company's purpose.
Consultation on the Wates Corporate Governance Principles for Large Private Companies
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