Our poll reveals mixed feelings about greater alignment of public and private companies

 

 

Our poll out today in conjunction with the ICSA: The Governance Institute, picks up on one of the questions posed by the BEIS Committee’s inquiry into corporate governance, finds that a very slim majority (39%) of those polled feel that there is no need for greater alignment between the rules governing public and private companies. Some 32% were in favour of greater alignment and 28% were not sure. Of those in favour of greater alignment, the main reason came down to size.

 

“It is clear from the results of the poll that many people consider that more consideration ought to be given to representative statistics such as number of employees, size of balance sheet, et cetera. There is some sense that there should be thresholds at which private companies should be held to higher standards than they currently are. Whilst alignment would be helpful given the size and economic impact of some private companies, it would have to be proportionate. Applying the same rules that relate to public companies to smaller private companies without the resources to comply with them would be too onerous,” says Peter Swabey, Policy and Research Director at ICSA: The Governance Institute.

 

Views expressed during the poll, which also asked which rules governing public companies should be introduced for private companies, include the following:

 

• There should be greater alignment between similar sized businesses irrespective of whether they are public or private
• A balance needs to be struck between regulation and encouraging entrepreneurship; smaller private companies need the flexibility to not get tied down with over regulation
• A requirement for a company secretary for private companies should be reintroduced, especially for larger organisations
• For larger private companies the guidance on governance and diversity should be applied
• Reporting requirements for the two should be better aligned, with private companies being required to disclose their governance arrangements.

 

“Some people feel that encouraging good governance more strongly in private companies by requiring them to adopt a governance code would be a positive step, and I could not agree more. Corporate governance is wider than just protecting shareholders; it should protect all those with a stake in the future of a business including lenders, employees, clients and suppliers. We recommend that a threshold should be set above which private companies should be required to disclose in their annual report the extent to which they comply with a corporate governance code. This threshold might be that they are required under the Companies Act 2006 to have audited accounts and to produce a directors’ report, or that they are subject to gender pay gap reporting requirements. The easiest way of ensuring that larger private companies are held to more stringent corporate governance standards, would be to enforce the need for a company secretary,” concludes Peter.

01 November 2016

 

 

written by Jon Moores
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