The Wates Corporate Governance Principles for Large Private Companies
In August 2017, the Government released its response to the Green Paper Consultation on Corporate Governance Reform. It received broad support for action to 'encourage high standards of corporate governance in the UK’s largest private companies reflecting the significant impact that these companies have on employees, suppliers, customers and others, irrespective of their legal status.’
In August 2017 the Government asked the FRC to establish a coalition group and act as Secretariat to take forward this work. In January 2018, the Government appointed James Wates CBE to chair the industry Coalition Group tasked with developing corporate governance principles for large private companies. In addition, the Chairman and the FRC have engaged with industry leaders and held public events to raise awareness and seek input prior to consultation.
On 10th December 2018, the Coalition Group issued the first Wates Corporate Governance Principles for Large Private Companies
There are six Principles and supporting guidance which will help large private companies comply with new regulations. The Wates Principles have been issued following a public consultation which ran from 13th June to 7th September 2018. The Feedback Statement to the consultation was also issued on 10th December.
The public response to the consultation is available here.
James Wates CBE, commented:
‘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.’
- James Wates CBE, Wates Group (Chairman)
- Department for Business, Energy and Industrial Strategy (Observer)
- Financial Reporting Council
- British Private Equity & Venture Capital Association
- Climate Disclosure Standards Board
- Confederation of British Industry
- Mark Goyder
- ICSA: The Governance Institute
- Institute of Business Ethics
- Institute of Directors
- Institute for Family Business
- The Investment Association
- Trades Union Congress
In June 2018 the Government introduced secondary legislation - the Companies (Miscellaneous Reporting) Regulations 2018 which requires private companies of a significant size to disclose their corporate governance arrangements in their directors’ report and on their website, including information on whether they follow a formal code.
The legislation applies to private companies which meet a specific threshold, exempting companies that are subject to an existing corporate governance reporting requirement. Companies that do not already follow a code are able to apply the Wates Corporate Governance Principles for Large Private Companies in order to disclose their corporate governance arrangements. It applies to companies reporting for their financial years commencing on or after 1 January 2019.
It is hoped the principles and guidance will provide a useful tool to help boards of directors understand and apply good practice in corporate governance, and explain their approach to their stakeholders.
In February 2022 the FRC issused a report on the first in-depth assessment of how companies are responding to the legislation, and, of those companies who have chosen to follow the Wates Principles, the quality of their reporting. The research, which was conducted with the University of Essex, shows that the Wates Principles are the most widely adopted corporate governance code used by large private companies. The report can be viewed here.