It comes on the back of the government’s green paper on corporate governance in 2016 and was the result of debate among stakeholders, experts and representative bodies. It also examined codes in other countries.
James Wates, chair of the Coalition Group that developed the principles, said he is “under no illusion that these principles will cure all the ills in the business world”.
“I nonetheless hope that they will provide a useful tool to help companies of all sizes – not just those who are caught by the legislative requirement – understand good practice in corporate governance and, crucially, adopt that good practice widely.
“I hope that companies look at these principles and see their compelling logic. Companies will not find in them a prescriptive list of actions they must take or boxes they must tick. These principles are about fundamental aspects of business leadership and performance, which every company must interpret and apply for itself,” added Wates.
Large private companies will be encouraged to follow the six principles to inform and develop their corporate governance practices and adopt them on an ‘apply and explain’ basis.
The corporate governance of big business has been in the spotlight in recent months in the UK, with a number of high profile failures.
Carillion entered into liquidation with a reported £5bn of liabilities one year after KPMG signed off its accounts as a going concern. Along with predicted job losses running into the thousands, its collapse is set to cost the UK taxpayers an estimated £148m.
Rachel Reeves MP, chair of the BEIS Committee, said Carillion had the hallmarks of another corporate governance failure with “directors asleep at the wheel while the business went off a cliff”, leaving pensions and public services under threat and suppliers out of pocket.
Today the FRC announced record fines for PwC and one of the Big Four firm’s audit partners for their work on BHS.
In 2015, Arcadia chairman Sir Philip Green sold BHS to Dominic Chappell’s Retail Acquisitions Limited despite Chappell being declared bankrupt twice before and having a lack of experience in the retail industry.
The retailer entered administration the following year and all of its stores closed in 2016, resulting in the loss of 11,000 jobs and a £571m pensions deficit.
During a parliamentary report into the collapse of BHS, MPs described the ownership of Chappell and Retail Acquisitions as “incompetent and self serving”.
The FRC is seeking submissions from business and the wider community with the final consultation to be published in December.
The consultation added that, “As the UK prepares to leave the European Union, it is hoped the principles will further promote its reputation as a global leader in corporate governance.”