Corporate Governance Reform
A recent Green Paper published by The Department for Business, Energy & Industrial Strategy explores a number of options aimed at strengthening the UK’s corporate governance framework. The UK’s current corporate governance regime focuses on publicly-listed companies; large private companies or limited liability partnerships are not expected or required to meet the same standards.
Whilst the shareholders of a public company arguably need greater protection, the Green Paper explores whether similar standards of governance and reporting should also apply to large privately-owned businesses. Every company will have a number of different stakeholders, including shareholders, employees, customers and suppliers, each of whom will have an interest in how well the business is run. A framework setting out the principles of good governance would certainly benefit such stakeholders and the businesses themselves.
However, the Green Paper recognises that care would need to be taken to ensure that any new standards are proportionate and practicable. Whilst introducing a corporate governance framework for smaller, family-run companies may contribute to their success, the Green Paper acknowledges that it would not be proportionate to apply such measures to these businesses. The focus, therefore, is on larger privately-owned companies.
The simplest way to ensure that such large companies adhere to high standards of corporate governance would be to extend the application of the UK’s Corporate Governance Code for Premium Listed Companies. However, some of its provisions will not be appropriate for privately-owned companies so an alternative would be to develop a separate code. The Green Paper also explores whether a voluntary approach would be preferable to introducing legislation.
Responses to the consultation are invited by 17 February 2017. The Green Paper states that the Government does not have any preferred options at this stage, so it is hoped that it will take all feedback into account.
For more information or to discuss any corporate governance issues affecting your business, please contact Nicola Lindop on 01279 712513 or firstname.lastname@example.org.