UK Corporate Governance Reform
On 11 June, the government laid new corporate governance related legislation before Parliament that will require:
- UK-incorporated quoted companies with more than 250 UK employees to report annually on pay ratio information comparing the CEO’s annual remuneration with the 25th, 50th and 75th percentile of the annual remuneration of the company’s UK employees;
- Large privately held companies to report annually on their ‘corporate governance arrangements’;
- UK-incorporated quoted companies to provide enhanced reporting on the exercise of discretion by the remuneration committee and certain matters relating to the impact of share movement on pay;
- Large companies – public and private – to report annually on how the directors have:
- complied with their section 172(1) Companies Act 2006 duty to promote the success of a company for the benefit of its members;
- engaged with their employees and had regard to employees’ interests, and
- had regard to their business relationships with suppliers, customers and others.
Subject to Parliamentary approval, the new requirements will apply to company reporting for financial years starting on or after 1 January 2019. This means that reporting on the new requirements will begin in 2020, covering activities undertaken and information collected in 2019.
In a related development the FRC has also published the Wates Corporate Governance Principles for Large Private Companies for consultation. The government hopes that many large, privately held companies will adopt these principles as an appropriate framework when complying with the new reporting requirement for corporate governance arrangements.
For more detail on the new reporting requirements, see our briefing below.