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U.K. corporate governance code should apply to large private companies — committee

The U.K. Work and Pensions Committee said an existing corporate governance code should be extended to the defined benefit funds of large private companies to make company directors more accountable.

The government published a proposal to reform corporate governance among large companies in November. The proposal followed the collapse of retailer BHS Ltd. and the impact on the future of retirement plans.

In its response to the proposal, the Work and Pensions Committee — a House of Commons committee — recommended that large private companies with more than 5,000 defined benefit plan participants should also be covered by the code. The code, which currently applies to public companies only, sets standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders.

The committee also said pension fund trustees need to be listed under the Companies Act 2006. The legislation sets out the duties of company directors, including a list of stakeholders they must regard in the course of their duties.

Currently pension fund trustees, who act on behalf of DB plan participants, are not explicitly listed as stakeholders, said the Work and Pensions Committee’s response.

“(The) recommended measure may increase the chances both that directors would take into account the interests of pensioners in carrying out their duties and that those who have failed to do so will be held accountable in the courts,” the committee response said.