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Corporate governance reforms 31/08/2017 Business Secretary Greg Clark has set out the Government's corporate governance reforms to enhance the public's trust in business.

Corporate governance reforms

Business Secretary Greg Clark has set out the Government's corporate governance reforms to enhance the public's trust in business.

These include plans for a public register of listed companies where a fifth of investors have objected to executive annual pay packages. This new scheme will be set up in the autumn and overseen by the Investment Association, a trade body that represents UK investment managers.

In the coming months the Government will also introduce new laws to require:

  • around 900 listed companies to annually publish and justify the pay ratio between CEOs and their average UK worker
  • all companies of a significant size to publicly explain how their directors take employees’ and shareholders’ interests into account
  • all large companies to make their responsible business arrangements public

The Business Secretary will also seek to ensure employees’ interests are better represented at board level of listed companies. He will ask the Financial Reporting Council (FRC), which sets high standards of governance through the UK Corporate Governance Code, to introduce a new requirement in the code to achieve this.

Under the code’s ‘comply or explain’ basis, firms would have to either:

  • assign a non-executive director to represent employees
  • create an employee advisory council
  • or nominate a director from the workforce

The FRC will also be asked to work with the business community and the Government to develop a voluntary set of corporate governance principles for large private companies.

The Government intends to bring the legislative reforms into effect by June 2018.

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