May to target private firms in governance crackdown
The government will target private firms as well as listed companies in its crackdown on executive pay and company behaviour, due to be outlined later on Tuesday.
Theresa May said she wanted to stop an “irresponsible minority” of private firms acting badly.
She said the changes would mean “everybody plays by the same rules”.
The move follows widespread anger over the collapse of BHS with the loss of 11,000 jobs and a big pension deficit.
The government said the proposed changes would better protect privately owned companies” employees, customers and pension funds from mismanagement.
It is one of a number of measures being considered by the government in its consultation on corporate governance, due to be announced later on Tuesday.
“We have seen an irresponsible minority of privately-held companies acting carelessly – leaving employees, customers and pension fund beneficiaries to suffer when things go wrong,” said Prime Minister Theresa May.
Proposals due to be announced by business secretary Greg Clark include a bespoke code of practice for the largest private companies who would have to comply or explain why they had not in their annual report.
Private firms will also be expected to report on diversity, greenhouse gas emissions and social and community issues.
The proposals will form part of the government”s green consultation paper on corporate governance, due to be published on Tuesday, which aims to increase public trust in business in the face of the rise in anti-globalisation and anti-business sentiment.
Its proposals will include:
The publication of the consultation comes after Theresa May appeared to row back from plans to force companies to appoint employees to their boards, an idea that had caused unease among companies.
She ruled out forcing firms to appoint employees to company boards when she gave a talk to the CBI last week, saying there were “other routes” to providing worker representation on boards, including advisory councils or panels.
TUC general secretary Frances O”Grady said the prime minister should have the confidence to take on “big business elites” over the issue.
“Workers on boards is a policy that”s tried, tested and proven in many other countries. And it will work for Britain too, helping us build a stronger and fairer economy,” she said.
But the Institute of Directors welcomed the proposed changes to private firms.
“The government is right to bring a new focus to the corporate governance of unlisted companies, which at the moment is a bit of black box – we don”t know what”s going on in there until something goes wrong,” said head of corporate governance Oliver Parry.