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“It’s time to shake up boardrooms, say MPs”… BEIS Committee release new report on Corporate Governance

Thursday 19 October 2017

“It’s time to shake up boardrooms, say MPs”… BEIS Committee release new report on Corporate Governance


The Business, Energy and Industrial Strategy Committee has published its report on the corporate governance inquiry that was kicked off in September 2016.  Launching the report the Committee Chairman, Iain Wright, noted: “Recent scandals and the issue of executive pay have undermined public trust in corporate culture…corporate governance rules need to be revised because companies have become disconnected from society”.

The Report highlight the role of NEDS and two main recommendations were made:

  1. That the FRC includes best practice guidance on professional support for non-executive directors when it updates the Code and that companies include training of board members as part of reporting on their people or human resources policy; and
  2. That the FRC updates the Code to provide guidance on how companies should identify clearly and transparently the roles of non-executive directors where they have particular responsibilities and how they should be held to account for their performance. NEDs should also be required to demonstrate more convincingly that they are able to devote sufficient time to each company when they serve on multiple boards.

The Committee makes a number of further recommendations, which it believes will help embed good corporate governance behaviours in UK businesses. They include:

  • The FRC amending the UK Code to require informative narrative reporting on the fulfilment of ‘Section 172’ duties - So that boards must explain precisely how they have considered each of the different stakeholder interest;
  • Giving the FRC expanded powers to enable it to deal with poor practice and engage with companies to improve performance;
  • Simpler pay structures - Comprising salary, bonus relating to stretching targets, including those relating to wider performance criteria, and payment by means of equity over the long term (normally at least five years);
  • Implementing measures to incentivise better stewardship - through more transparency and better reporting, including the annual publication of pay ratios;
  • Encouraging the Government to set a target of at least 50% of all new appointments to senior and executive management level positions in the FTSE 350 and all listed companies being women by May 2020;
  • The establishment of stakeholder advisory panels consisting of workers, consumers and suppliers; and
  • Companies should seek to appoint workers on boards - this is hoped to improve board diversity and provide both challenge and a different perspective on the board.

A copy of the report is here: 

https://www.publications.parliament.uk/pa/cm201617/cmselect/cmbeis/702/702.pdf




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The Business, Energy and Industrial Strategy Committee has published its report.