The U.K. Financial Reporting Council launched the Wates Principles on Monday, a code for the corporate governance of large private companies, the U.K. regulator promoting corporate governance and reporting to foster investment said in a news release.
The six principles "encourage these companies to adopt a set of key behaviors to secure trust and confidence among stakeholders and benefit the economy and society in general," according to the news release. The six principles are:
- Board responsibilities – Boards and individuals should understand their levels of accountability and their responsibilities.
- Board composition – Boards should be composed of an effective chair and directors with a balance of backgrounds, experience, knowledge and skills, and the size of the board should be reflected by the company's scale and complexity.
- Purpose and leadership – Boards should develop and promote "the purpose of a company and ensures that its values, strategy and culture align with that purpose."
- Opportunity and risk – Boards should identify opportunities to "create and preserve value and establishing oversight for the identification and mitigation of risks" to promote the long-term success of their companies.
- Renumeration – Boards should promote executive compensation structures aligned with their companies' long-term sustainable success.
- Stakeholder Relationships and Engagement – Board directors should foster effective relationships with their stakeholders.
The principles were developed by a coalition founded by the Financial Reporting Council. James Wates, chairman, Wates Group, led the coalition.
"I believe that good business, well done, is a force for good in society. The Wates Corporate Governance Principles are a tool for large private companies that helps them look themselves in the mirror, to see where they've done well, and where they can raise their corporate governance standards to a higher level," Mr. Wates said in the news release. "Good corporate governance is not about box-ticking It can only be achieved if companies think seriously about why they exist and how they deliver on their purpose then explain — in their own words — how they go about implementing the principles. That's the sort of transparency that can build the trust of stakeholders and the general public."
The principles are available on the FRC's website.