London, 10 December 2018 – ICSA: The Governance Institute has welcomed the publication today by the Financial Reporting Council of a new code for the corporate governance of large private companies.
The Wates Principles provide a framework to help them meet new legal obligations created by The Companies (Miscellaneous Reporting) Regulations 2018, which will come into force for financial years commencing on or after 1 January 2019. Companies will, from that date, be required to state which corporate governance code, if any, the company applied in the financial year, how the company applied that code and, if the company departed from it, the respects in which it did so, and its reasons for so departing. If the company has not applied any corporate governance code for the financial year, it must state why not and explain what arrangements for corporate governance were applied for that year.
These Principles have been developed by a coalition established by the Financial Reporting Council (FRC), chaired by James Wates CBE, and of which Peter Swabey, Policy and Research Director at ICSA was a member. They are intended to provide an appropriate framework for larger private companies, encouraging them to adopt a set of key behaviours to secure trust and confidence among stakeholders and benefit the economy and society in general.
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.
Peter Swabey, Policy and Research Director at ICSA: The Governance Institute said: “The new regulations extend the requirement to report on its corporate governance to large private companies and the Wates Principles are an attempt to develop a code more specifically aimed at the requirements of larger private companies. It is important to emphasize that they are not mandatory – large private companies do, after all, have such a variety of ownership structures, ranging from family businesses to the subsidiaries of large public companies and it may be that another code is more appropriate for any individual company. The main issue is that such companies must now be explicit about their governance arrangements, and I believe that these principles are a useful starting point, particularly for those companies which have, perhaps, not explicitly considered their governance arrangements in this way.”
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For further information, please contact Maria Brookes, Media Relations Manager:
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Notes to Editors:
- ICSA: The Governance Institute is the professional body for governance. We have members in all sectors and are required by our Royal Charter to lead ‘effective governance and efficient administration of commerce, industry and public affairs’. With over 125 years’ experience, we work with regulators and policy makers to champion high standards of governance and provide qualifications, training and guidance. Website: www.icsa.org.uk