‘Good business well done is good for society. Private companies are a significant contributor
to the UK economy, providing tax revenue and employing millions of people. They have a
significant impact on people’s lives, and it is important they are well-governed and
transparent about how they operate.’
- Sir James Wates, Wates Group Chairman-
The Wates Corporate Governance Principles for Large Private Companies encourage
businesses to adopt a set of key behaviours to secure trust and confidence among
stakeholders and benefit the economy and society in general.
Although the Wates Corporate Governance Principles are designed to provide a framework
to help large private companies meet legal requirements, raise their corporate governance
standards and promote long-term success, nothing in them overrides or is intended to
interpret the duty of a director in Section 172 of the Companies Act 2006.
Discuss.
Answer:
Business organisations are the pillars which sustain the economy of a country,
especially in the form of public and private companies. Recently, statistics by Financial
Reporting Council (FRC) showed that there is a trend of the increasing number of private
companies following the notable decline of public companies.1 A vital distinction between
them was that private companies were funded by the founding members through their
personal savings or bank loans; whereas public companies intends to raise large amount of
money from the public.2 Therefore, private companies is not subjected to the same level of
1
Kristy Merrick, Financial Reporting Council Consultation Paper: The Wates Corporate Governance Principles
for Large Private Companies, 4.
2
Alan Dignam, John Lowry, Company Law, 8.
, reporting and accountability requirements as public companies as they enjoyed limited
liability privileges since they have no reliance on public equity markets to raise capital. 3
However, several large-scale corporate failure such as the collapse of British Home Stores
(BHS) in 2016, was a warning to the United Kingdom government as to the lack of
transparency and accountability given to private companies. The absence of public scrutiny
and corporate governance did not hundred percent secure the benefits of shareholders and
other stakeholders. Indirectly, the operation of private companies had gained public attention
as they occupied a large portion in the UK economy, which carried a bigger risk to bring a
significant impact towards the society. In this circumstance, The Companies (Miscellaneous
Reporting) Regulations 2018 was published and come into force in 1st January 2019 to ensure
a company is being well run.
Under the 2018 regulations, large private companies which has more than 2,000
employees or has (1) a turnover of more than £200 million and (2) total assets more than
£2billion are required to make a statement on their corporate governance arrangements on
the company's website so that it is accessible to the public, eventually promote transparency.4
The statement do includes how the directors have discharged their duties under s172
Companies Act 2006 (CA 2006); how they engaged with and had regard to the interest of
stakeholders and employees when making key decisions; and their CEO pay ratio. 5 The
purpose of the regulation is to encourage private companies voluntarily adopt a ‘code’ to
meet legal requirements and promote long-term success, ultimately regain public trust.6 In
this case, James Wates was appointed as Chairman of the Coalition Group under FRC to
develop corporate governance principles specifically for large private companies as The UK
Corporate Governance Code contains elements that are not appropriate for them, and the
final production was Wates Corporate Governance Principles (WCGP).7
A company that adopts WCGP is expected to apply them fully. Using an apply and
explain approach, “large private companies are expected to provide a supporting statement
for each principle that gives an understanding of how their corporate governance processes
3
Merrick n(1) 4.
4
The Companies (Miscellaneous Reporting) Regulations 2018
5
Ibid.
6
James Wates, Governance in large private companies and the Wates Principles, 4.
7
Merrick n(1) 3.
to the UK economy, providing tax revenue and employing millions of people. They have a
significant impact on people’s lives, and it is important they are well-governed and
transparent about how they operate.’
- Sir James Wates, Wates Group Chairman-
The Wates Corporate Governance Principles for Large Private Companies encourage
businesses to adopt a set of key behaviours to secure trust and confidence among
stakeholders and benefit the economy and society in general.
Although the Wates Corporate Governance Principles are designed to provide a framework
to help large private companies meet legal requirements, raise their corporate governance
standards and promote long-term success, nothing in them overrides or is intended to
interpret the duty of a director in Section 172 of the Companies Act 2006.
Discuss.
Answer:
Business organisations are the pillars which sustain the economy of a country,
especially in the form of public and private companies. Recently, statistics by Financial
Reporting Council (FRC) showed that there is a trend of the increasing number of private
companies following the notable decline of public companies.1 A vital distinction between
them was that private companies were funded by the founding members through their
personal savings or bank loans; whereas public companies intends to raise large amount of
money from the public.2 Therefore, private companies is not subjected to the same level of
1
Kristy Merrick, Financial Reporting Council Consultation Paper: The Wates Corporate Governance Principles
for Large Private Companies, 4.
2
Alan Dignam, John Lowry, Company Law, 8.
, reporting and accountability requirements as public companies as they enjoyed limited
liability privileges since they have no reliance on public equity markets to raise capital. 3
However, several large-scale corporate failure such as the collapse of British Home Stores
(BHS) in 2016, was a warning to the United Kingdom government as to the lack of
transparency and accountability given to private companies. The absence of public scrutiny
and corporate governance did not hundred percent secure the benefits of shareholders and
other stakeholders. Indirectly, the operation of private companies had gained public attention
as they occupied a large portion in the UK economy, which carried a bigger risk to bring a
significant impact towards the society. In this circumstance, The Companies (Miscellaneous
Reporting) Regulations 2018 was published and come into force in 1st January 2019 to ensure
a company is being well run.
Under the 2018 regulations, large private companies which has more than 2,000
employees or has (1) a turnover of more than £200 million and (2) total assets more than
£2billion are required to make a statement on their corporate governance arrangements on
the company's website so that it is accessible to the public, eventually promote transparency.4
The statement do includes how the directors have discharged their duties under s172
Companies Act 2006 (CA 2006); how they engaged with and had regard to the interest of
stakeholders and employees when making key decisions; and their CEO pay ratio. 5 The
purpose of the regulation is to encourage private companies voluntarily adopt a ‘code’ to
meet legal requirements and promote long-term success, ultimately regain public trust.6 In
this case, James Wates was appointed as Chairman of the Coalition Group under FRC to
develop corporate governance principles specifically for large private companies as The UK
Corporate Governance Code contains elements that are not appropriate for them, and the
final production was Wates Corporate Governance Principles (WCGP).7
A company that adopts WCGP is expected to apply them fully. Using an apply and
explain approach, “large private companies are expected to provide a supporting statement
for each principle that gives an understanding of how their corporate governance processes
3
Merrick n(1) 4.
4
The Companies (Miscellaneous Reporting) Regulations 2018
5
Ibid.
6
James Wates, Governance in large private companies and the Wates Principles, 4.
7
Merrick n(1) 3.
