Research & Strategy

By Design Portfolio - 10 Apr 2017

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Last week the business, energy and industrial strategy (BEIS) committee published its full inquiry report on corporate governance in British businesses. The inquiry takes into account the main themes of the Prime Minister’s Green Paper along with broader aspects of corporate governance. The report looks to examine whether corporate governance in the UK is still fit for purpose and it introduces some potential reforms to the governance framework.

Some of the main recommendations from the report are below:

  • Remuneration – Scrapping complex long-term incentive plans in favour of a more simple pay structure comprising salary, bonus and payments by means of equity.
  • FRC Power – Increasing the power of the Financial Reporting Council (FRC) to enable them to call out poor practice and engage with companies to improve performance.
  • Private governance – Development of a new governance Code for the largest private companies.
  • Diversity – In light of the call of the Green Paper for better stakeholder engagement at board level, BEIS recommends the appointment of workers on the board. Additionally, a target should be set to ensure that by May 2020 at least half of all new appointments to senior executive management level positions in all listed companies will be women.

What was said about reporting?

As a specialist in corporate reporting it was particularly interesting for us to see the outcomes of the inquiry in regards to reporting. BEIS recommends that directors should be required to report in an accessible, narrative and bespoke form on how they have complied with their duties under Section 172 of the companies act.

When referring to Section 172, BEIS expects this to be addressed in terms of Enlighted Shareholder Value (ESV). This means boards will be required to provide better information on how they have looked after the interests of employees as well as the interests of shareholders, fostered relations with suppliers and mitigated environmental impacts.

We certainly welcome this requirement as we recognise the benefits that wider value creation can provide a business as it enables long-term benefits for its shareholders and enhances efficiencies, profit and wealth maximisation as well as stability.

More information

This week we will be publishing a white paper addressing the importance of environmental, social and governance information and how this can be communicated effectively.

In the meantime, if you would like to speak with us about how you can improve your own corporate governance disclosure, please get in contact with Rochelle O’Hagan at rochelle.ohagan@design-portfolio.co.uk or on 0207 536 2055.