EDITORIAL: REPORTING BY LARGE PRIVATE COMPANIES

It’s been over three years since the Wates Corporate Governance Principles for Large Private Companies were published. To coincide with the publication of the first round of company annual reports implementing the Companies (Miscellaneous Reporting) Regulations 2018 in late 2020, the FRC commissioned a research project to identify which companies within the scope of the regulations provided a corporate governance statement in their 2019 annual reports and, of those that did, how many applied the Wates Principles or an alternative corporate governance code. 

Of the 1206 companies whose annual reports were analysed for the purposes of the research, 410 did not prepare a governance statement and did not mention governance anywhere else in their annual report. 770 companies did provide a corporate governance statement and a further 26 companies did not provide a statement but did discuss governance elsewhere in their annual report.

The Wates Principles were the most widely adopted corporate governance code, with 348 companies adopting them (77 per cent of those adopting at least one corporate governance code). The research also analysed the quality and readability of the disclosures. 

In his foreword to the research, Sir James Wates, CBE comments, "It is relatively early to draw too many conclusions, with some companies still having completed only their first cycle of reporting against the Wates Principles, but this research provides us with the timely and rigorous analysis we need in order to inform ongoing government policy decisions about corporate governance. I’m pleased with how many companies are grasping the spirit of the Wates Principles in their governance reporting. This means they are using the principles as a tool for self-reflection and improvement, and seeing the yearly governance reporting as an opportunity, not a burden. Many companies are clearly seeking not just to tick boxes but to communicate to their stakeholders' relevant information about how they are governed, with an appropriate level of detail, using clear and understandable language." 

You can read the full report here.