The Wates Corporate Governance principles for large private companies has been published

In its response to its Green Paper on Corporate Governance, the government invited the FRC and several other bodies to create a group that would work on a set of corporate governance principles for private companies. In January 2018, the FRC announced this group would be chaired by James Wates CBE. The final six principles were published on 10th December 2018.

The Wates Principles offer all companies that are not subject to a formal corporate governance code an opportunity to consider their approach to governance and aspire to meet the Principles. The Wates Principles offer companies, even those not subject to the regulation, an opportunity to demonstrate good practice and how they achieve long-term success of the company.

The guidance includes six principles

The North Star

1. 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.

Characteristics of Governance

2. 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

3. Director 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.

Specific matters

4. 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.

5. 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.

6. 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.