“The purpose of corporate governance is to facilitate the effective, entrepreneurial and prudent management that can deliver the long term success of a company”
With the general election only one day away, both the Conservative and Labour parties have taken different approaches to addressing corporate governance in their party manifestos, although both are looking to implement a number of recommendations already made to the Government:
The Conservative Party has pledged to:
- legislate to make executive pay packages, subject to strict annual votes by shareholders;
- require listed companies to publish a ratio of executive pay to broader UK workforce pay and explain their pay policies;
- commission an examination of the use of buyback shares so that they cannot be used to hit performance targets and inflate executive pay;
- require listed companies either to nominate a director from the workforce or create a formal employee advisory council or assign specific responsibility for employee representation to a designated non-executive;
- give employees of listed companies a right to request information relating to the company’s future direction;
- consult on how to strengthen the corporate governance of privately-owned businesses; and
- require large companies to publish more data on the gender pay cap.
The Labour Party would like to:
- introduce an excessive pay levy for companies with large numbers of staff on high pay;
- introduce a 20.1 limit on the gap between lowest and highest paid workers in companies with government supply contracts;
- introduce equal pay audit requirements for large employers;
- implement the Parker Review recommendations to increase ethnic diversity on boards; and
- tighten rules on corporate accountability for abuses in global supply chains.
The outcome of the general election has yet to be decided, but with Brexit just around the corner, it is likely that the debate around reforming corporate governance structures will only become more prevalent within the next few years.
Harry Wright is a solicitor in the corporate team at Stephens Scown. If you have any queries then please do contact Harry 01392 210700, or by email firstname.lastname@example.org.