In August 2017, the UK Government released it’s Corporate Governance Reform – government response to it’s November 2016 green paper consultation.
The consultation had set out to receive views on how to improve the corporate governance framework, and having received 375 responses, the newly released paper ‘identifies nine proposals for reform which it now intends to take forward’.
Proposed are a ‘package of measures designed to:
• Address concerns that a minority of companies are not responding adequately when they encounter significant shareholder opposition to levels of executive pay. Remuneration committees will also have to do more to engage with the workforce to explain how top pay relates to wider company pay policy. And pay ratio reporting comparing the remuneration of the CEO with average UK employee pay will be introduced for quoted companies to help set executive pay in the wider company context;
• Drive change in how our largest companies engage at board level with employees, customers, suppliers and wider stakeholders to improve boardroom decision-making, deliver more sustainable business performance and build wider confidence in the way businesses are run; and
• Encourage large private companies to adopt stronger corporate governance arrangements, reflecting their economic and social significance, through the development of a set of corporate governance principles; and introduce new measures to require companies, both public and private, of a significant size to disclose the corporate governance arrangements they have in place.
These measures are in line with the UK’s approach of strengthening corporate governance through non-legislative means: through changes to the UK Corporate Governance Code overseen by the Financial Reporting Council and voluntary industry-led action where possible, and legislating where necessary.’
Written by Liv Noble