Corporate Governance Reform

A summary of the Corporate Governance Reform Green Paper. 

Jump to the main content area

November saw the Government release a Green Paper on Corporate Governance Reform centred around three key areas of focus.

  1. The influence of shareholders on executive pay
  2. Creating a greater connection between the board and employees and other stakeholders who may have an interest in corporate performance
  3. Whether some of the largest privately held companies should undertake some features of corporate governance and reporting.

This Green Paper is part of a Government initiative that aims to ‘enhance public trust in business as a force for good’ that includes the Review on Employment Practices in the Modern Economy from Matthew Taylor, Sir John Parker’s independent Report into the Ethnic Diversity of UK Boards and the Hamilton-Alexander review on Gender Diversity.

The first area outlined in the Corporate Governance Reform Green Paper centers around increasing shareholders influence in relation to executive pay. It includes suggestions such as strengthening shareholder voting rights, strengthening the role of the remuneration committee and improving the effectiveness of long-term pay incentives as ways to engage stakeholders.

To improve the connection between the board of directors and their workforce, the Green Paper suggests that advisory bodies should be established and non-executive directors should be appointed to take formal responsibility for articulating specific stakeholder perspectives. It has been said however that companies should be allowed to select the most appropriate ‘mechanisms’ for their business.

The final question that the Green Paper poses is whether the largest privately-held companies in the UK should be held to a higher ‘minimum standard of corporate governance and reporting’, whether this be in the form of an extended corporate governance code or something that is tailored to the circumstances. This would allow shareholders to ensure that the companies ‘run in their interests’ and that they have the ‘information to hold the executive directors to account’.

You can find the report here with more detailed information on all the proposed areas of change. For more information on how we can help you with communicating your key messages, why not get in touch with our team.