Measures proposed by Conservative leadership candidate Theresa May to improve the governance of big companies received tentative support today from the Institute of Directors, the UK’s largest organisation for company directors. The IoD, which holds a Royal Charter to “promote for the public benefit high levels of skill…and integrity on the part of directors”, has previously criticised examples of poor governance at the UK’s largest companies. Oliver Parry, Head of Corporate Governance at the IoD, said:
“The IoD has long argued that the leaders of large corporations have a responsibility to consider how their actions affect the general reputation of business. We are unapologetically and unstintingly pro-business, and it is exactly for this reason that we have called out failures of governance where boards have let down their shareholders, customers or employees.
“Theresa May has suggested some bold solutions, and the details will need to considered carefully, but the IoD agrees it is time to give shareholders more control over executive pay. There have been some positive signs that boards are moderating pay, but it is still possible for directors to ignore even substantial shareholder rebellions. Placing workers on boards can bring benefits in terms of better employee engagement, and we would urge companies to consider doing so, although we would stop short of making it compulsory for firms.
“How the UK’s biggest companies are run is of central importance to the economy, so we are very pleased that both candidates to replace David Cameron have discussed issues of executive pay and corporate governance in the recent days. The EU referendum campaign was very bruising for businesses, and exposed a clear gap in public trust. It is now in everyone’s interest for that trust to be rebuilt.”