Family Firms Encouraged to Get Involved In Corporate Governance Debate
13th June 2018
Family businesses are being encouraged by the IFB to share their views as part of a consultation on the new Wates Corporate Governance Principles for Large Private Companies.
The new principles have been developed by a Coalition of business organisations, chaired by James Wates CBE. The Coalition, which includes the IFB, was appointed by the Secretary of State for Business, Energy and Industrial Strategy in August 2017. The Coalition has spent months developing the Principles, seeking input from businesses and organisations across the UK.
Each of the six principles is accompanied by guidance for businesses, designed to help them better understand how the principles can be applied in practice.
WATES PRINCIPLES FOR CORPORATE GOVERNANCE
Principle One – Purpose
An effective board promotes the purpose of a company, and ensures that its values, strategy and culture align with that purpose.
Principle Two – 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.
Principle Three – 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.
Principle Four – 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.
Principle Five – 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.
Principle Six – 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.
Businesses of all sizes can now share their views on the principles, as they open to public consultation. The consultation is open until 7 September 2018, and you can find more information on how to respond here. The final version of the Wates Principles will be published in December 2018.
“Good business well done is good for society" - James Wates
James Wates CBE, Chair of the Coalition Group that developed the principles, said,
“Good business well done is good for society. Private companies are a significant contributor to the UK economy, providing tax revenue and employing millions of people. They have a significant impact on people’s lives, and it is important they are well-governed and transparent about how they operate.
“These principles will provide a flexible tool for companies of all sizes, not just those captured by the legislative requirement, to understand good practice in corporate governance and, crucially, adopt that good practice widely. The principles are about fundamental aspects of business leadership and performance.”
"It’s important that business leaders share their views now, and tell us what they think about these new principles” - Elizabeth Bagger, IFB
Welcoming the launch of the consultation Elizabeth Bagger, Executive Director at the Institute for Family Business said:
“Whilst most family businesses act responsibly, the actions of a few businesses has damaged trust in UK business as a whole. We hope that the adoption of new Corporate Governance Principles will help to repair that trust.
“Good governance is an important part of a successful business, and we know that families care about having a well-governed business that will be sustainable for the long term. 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. We know that many businesses will already meet high standards, but hope that 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 last summer we spoke about 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 now get involved, respond to the consultation, and let the Coalition know whether the principles reflect their needs. It’s important that business leaders share their views now, and tell us what they think about these new principles.”
To find out more about all the reforms underway, and how they will affect your family business, join our webinar on 26 June. More information here.
Or contact Fiona Graham, IFB External Affairs and Policy Director, on firstname.lastname@example.org.