- Government Corporate Governance proposals fall short
- New Corporate Governance Commission (CGC) to undertake wide-ranging review required
- Enhanced role for remuneration committee to ensure fair pay across the business
- Strategic review of corporate reporting
- Governance codes should also cover large privately owned businesses
The Government’s Green Paper on Corporate Governance Reform, published in November, has called for views on three main areas of governance: executive pay, employee and customer voice and corporate governance in large private businesses. The purpose of the consultation is to strengthen and cement the UK’s place as an attractive place to do business.
Corporate Governance Commission
In its response, Mazars has called on the Government to go much further than the current proposals. In a wide-ranging response, Mazars has called for a 12-month review of corporate governance led by a new, independent, Corporate Governance Commission with wider ranging powers than the Financial Reporting Council, which would then be responsible for the application and oversight of the review findings.
Executive pay to be fair to all stakeholders
On the question of executive pay Mazars calls for any settlements to be fair to all stakeholders, something many feel that current arrangements have failed to achieve. The proposed Commission should look to drive consensus on bonus payments, with long-term success and fair distribution to employees at all levels being at the core of such awards.
As part of the board’s commitment to the fair treatment of all employees, the role of the remuneration committee should be extended to look at remuneration policies across the business ensuring they are fair and motivating for all team members. In particular, incentives should support a focus on productivity, and consequent increase the remuneration of lower paid employees, which has risen little in recent years.
Putting people at the heart of governance
Additionally, intangibles and an organisation’s people is an area neglected for too long given their vital importance to modern business. Over 80% of the assets of leading companies today are intangible in nature and hence are very dependent on a highly skilled, agile and motivated workforce.
Mazars propose the introduction of stakeholder panels reporting to a stakeholder committee at board level focused on the fair treatment of, and good engagement with, stakeholders. The stakeholder committee should comprise board members with a majority of independent directors. It is expected the views of its stakeholder panel would be reflected in a FTSE350 company’s annual report.
Strategic review of corporate reporting
Corporate reporting and assurance are crucial element of corporate governance and a strategic review of their future direction is well overdue. Among topics to be explored should be the development of integrated reporting, the future role of assurance on narrative reporting and the impact of technology on reporting including on the future shape of the annual report and online reporting. Greater focus should be given to reporting of human rights as it is a key area for leading UK listed companies given their global operations, and one in which the UK is seen as a world leader.
Extending Corporate Governance requirements to large private companies
Mazars has also called on the Government to extend good governance requirements to some large private businesses. Those which play an important role at a regional level, have significant workforces or have a strategic place in the national economy should be encouraged to adhere to leading-edge corporate governance standards.
Anthony Carey, UK head of board practice, at Mazars, said:
“We are calling for a wide-ranging review of corporate governance by an independent commission, reporting back within a year, that includes representatives from boards, investors, employees, consumers and civil society.
“Having delivered its report, we believe the commission should then be tasked with oversight of any new codes, undertaking thematic reviews and for convening the relevant parties to discuss major governance issues which affect the wider business community.
“We strongly support the Government’s focus on sustainable business success, however, we believe much more can and should be done. There needs to be a more holistic review of corporate governance that provides a system that balances freedom to manage businesses within a robust framework of accountability.”
Full details of Mazars’ response to the Green Paper are attached.
For further information please contact:
GLR Public Relations – 01943 851311
Jason Clarke – Jason.firstname.lastname@example.org
Notes to editors:
Mazars is an international, integrated and independent organisation, specialising in audit, accountancy, advisory, tax and legal services. As of January 1st, 2017, Mazars operates throughout the 79 countries that make up its integrated partnership. Mazars draws upon the expertise of 18,000 women and men led by 950 partners. We assist clients of all sizes, from SMEs to mid-caps and global players as well as start-ups and public organisations, at every stage of their development. In the UK, Mazars has approximately 140 partners and over 1,700 employees serving clients from 19 offices, and is ranked one of the top 10 firms nationally.
For all national news and expert commentary, visit our website at www.mazars.co.uk
News and our latest announcements are also published via the firm’s page on LinkedIn at www.linkedin.com/company/mazars-UK or you can follow us on Twitter @Mazars_UK