New Corporate Governance Principles for Private Companies Launched
10th December 2018
The Wates Principles for corporate governance of large private companies have been launched today. The new principles provide a framework to help private companies not only meet legal requirements, but also to promote long term success.
These Principles are part of a number of changes made this year to the UK corporate governance framework. They have been developed by a coalition chaired by James Wates CBE, which included the IFB, CBI, FRC, TUC and others. By explaining the application of these Principles large private companies will be able to meet their obligations under The Companies (Miscellaneous Reporting) Regulations 2018.
James Wates CBE, Wates Chairman, said:
“I believe that good business, well done, is a force for good in society. The Wates Corporate Governance Principles are a tool for large private companies that helps them look themselves in the mirror, to see where they’ve done well, and where they can raise their corporate governance standards to a higher level. Good corporate governance is not about box-ticking It can only be achieved if companies think seriously about why they exist and how they deliver on their purpose then explain – in their own words – how they go about implementing the principles. That’s the sort of transparency that can build the trust of stakeholders and the general public.”
Elizabeth Bagger, IFB Executive Director, said:
“Good governance is an important part of a successful business, and we know that families care about having well-governed businesses. But not all businesses have the structures in place that they need to manage risk and take long term decisions.
“We hope that these new Principles will give all private businesses an opportunity to think about their governance arrangements, consider what they could be doing better, and take steps towards that. While many businesses will already meet high standards, they will benefit from the guidance which accompanies the Principles in helping them identify if there are areas where they could improve even further.
“When the Government launched its Corporate Governance reform proposals we highlighted the importance of taking into account the diversity of private businesses in the UK. That included ensuring family businesses had a voice in the process. As part of the Coalition we have worked tirelessly to ensure that these principles make sense for family firms, and take into account their unique structures.
“We strongly encourage family businesses to take some time to read these new principles and think about how they can help their business grow for generations to come”.
The six principles are:
Purpose and Leadership – An effective board develops and promotes the purpose of a company and ensures that its values, strategy and culture align with that purpose.
Board 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.
Board Responsibilities - The board and individual directors should have a clear understanding of their accountability and responsibilities. The board’s policies and procedures should support effective decision-making and independent challenge.
Opportunity and Risk - A board should promote the long-term sustainable 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 long-term sustainable success of a company, taking into account pay and conditions elsewhere in the company.
Stakeholder Relationships and Engagement - Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.
Reporting against these principles will take effect on 1 January 2019.
Read the Wates Principles in full.