Insurance Regulatory eBulletin - Corporate Governance

The Wates Corporate Governance Principles for Large Private Companies
On 13 June, the FRC published a consultation on the Wates Corporate Governance Principles for Large Private Companies. The principles were developed following the Government’s 2016 Green Paper and the BEIS Select Committee’s report of April 2017 which considered the need for improved transparency and accountability in this area.

The draft Principles are intended to recognise the variety of large private companies incorporated within the UK and the range of differing management and ownership structures. This means that a one-size-fits-all approach to corporate governance in large private companies is not appropriate. The draft Principles seek to accommodate this by introducing a high-level approach to good corporate governance, which can be applied by any large private company. They are intended to allow sufficient flexibility for companies to explain the application and relevance of their corporate governance arrangements.

A company that adopts the Principles is expected to apply them fully, using an apply and explain approach, and are expected to provide a supporting statement for each principle that gives an understanding of how their particular corporate governance processes operate and achieve the desired outcomes. The draft Principles are:

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.

Responses should be submitted by 7 September 2018.