Corporate Governance And The Wates Consultation

All large and very large private companies and unlicensed plcs will have to start preparing for the new corporate governance reporting requirements due to receive parliamentary approval. The new regulations will strengthen the UK's international reputation for having a robust corporate governance framework, which makes the UK an attractive prospect with regard to investment and also makes it a good place to do business.

The journey to bolster the current corporate governance regulations began in November 2016 with the publication of a Green Paper, particularly aimed private companies, on corporate governance reform arising from concerns from the public about the high levels of executive pay and the apparent disconnect between performance and remuneration. It was also evident that there was disquiet in connection with the perceived remoteness of the boards of such companies and the lack of representation of employees.

The Government set out a raft of reforms following receipt of 375 written responses to the Green Paper coming from businesses, professional and trade organisations and the general wider society. The Business, Energy and Industrial Strategy (BEIS) committee had also reported on corporate governance, the data and conclusions from the committee's findings were added to the information being reviewed.

The new regulations will oblige companies to explain in their annual reports how their directors have complied with the requirements of Section 172 of the Companies Act, which requires companies to have regard for their employees' interests as well as those of their customers and suppliers. The objective is to make the directors of companies to think more thoroughly about how they are dealing with these matters and the more comprehensive information will enable shareholders to hold the directors to account. The very large private companies will have to make a statement about their corporate governance arrangements and whether they are intending to comply with the Wates corporate governance principles. They will have to disclose their governance arrangements on their websites and in their directors' report. Should they feel that there is a justification for not complying with any part of the code their reasons must also be explained.

Quoted companies whose head count exceeds 250 UK employees will have to publish pay ratios comparing the CEO's remuneration to the median employee pay at the 25th and at the 75th quartiles...