The IoD's Head of Corporate Governance, Oliver Parry introduces the second of the IoD's Manifesto papers into what business wants from government after the General Election.
The UK enjoys one of the best corporate governance regimes in the world, one that is admired and replicated by many other countries. That said good corporate governance requires constant attention and if the UK is to retain its competitive advantage it must ensure that the framework in place today is fit for tomorrow. It is impossible for the regulatory system alone, no matter how complex and well-meaning, to guarantee the sort of corporate behaviour we would all like to prevail. However with the correct balanced framework in place, behaviours can develop organically and in tune with the needs of the time.
Our business manifesto paper on corporate governance puts forwards three key proposals for the next government to take forward.
- The first seeks to bring the very largest private companies under a code of governance. The failure of some large private companies has far reaching consequences on its stakeholders and society. Therefore these companies should be held to similar standards of best practise that are seen in the listed market.
- Our second proposal seeks to address the issue of executive remuneration, namely we are seeking to ensure that shareholders feel enfranchised on the issue and that companies are engaging with them on the issue of executive pay. We propose that where a significant minority (30%) vote against a pay policy put forward at AGM, premium listed companies should amend their policy and offer a second vote. This will force boards to consult shareholders more before voting begins, and encourage them to pre-emptively address concerns over pay.
- Finally we encourage the government to increase the focus on directors training and continued professional development. Directors, and particularly non-executive directors, require knowledge and skills to perform the role, beyond commercial experience. Independent non-execs have a vital function in holding the management to account and constructively probing their decision. Directors at companies of all sizes can benefit from job-specific training.
We believe that these 3 proposals would complement much of the existing and robust corporate governance framework in the UK, and would enable us to maintain our competitive advantage and reputation as the home of good governance.
Reforming Corporate Governance: Enhancing Britain's Competitive Advantage
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