More than 60% of company directors would back sweeping reforms to corporate governance that tighten the reins on private firms to help prevent another BHS-style crisis, a report has found.
A survey of 34,000 bosses revealed two thirds want a new code of conduct to govern private companies in line with the level of scrutiny faced by publicly-listed firms, according to the Institute of Directors.
The findings come as the IOD looks to make its submission to the Government’s consultation on corporate governance, which closes on Friday.
However, the lobby group stopped short of calling for private firms to fall under the Financial Reporting Council’s corporate governance code, which sets standards on board leadership, remuneration and shareholder relations for public companies.
Stephen Martin, director general of the IOD, said the UK’s standards for publicly-listed firms are emulated across the world, but the governance for private companies remains a mystery.
“For small companies, any new reporting requirements would be excessive, but there is a real appetite in the business community for a new code for large private firms.
“A private code would have to be less prescriptive than the one for listed corporations, based on broad governance principles rather than a lot of tick-box compliance.
“If they get this right, the Government could really help to make boardrooms more transparent, and improve the functioning of these companies.”
The work and pensions committee said last week that the Government would prevent another corporate crisis similar to the downfall of BHS if it made private firms abide by the FRC corporate code.
It recommended that large private companies – or those with more than 5,000 defined benefit pension scheme members – should fall under FRC rules and called for changes to be made to the Companies Act 2006 to make directors at private businesses accountable to pensioners through their scheme’s trustees.
The potential shake-up comes as some of Britain’s biggest public companies are braced for a showdown with investors over executive pay.
Travel giant Thomas Cook had to stomach a shareholder backlash last week after nearly a third of shareholders voted against a long-term management bonus scheme.
Investors voted 32.7% against the 2017 strategic share incentive plan (SSIP), which could have paid chief executive Peter Fankhauser up to 225% of his annual salary – a potential £1.6 million.
Barclays is also understood to be freezing chief executive Jes Staley’s salary in an attempt to head off shareholder ire.
Mr Martin said there was “too little transparency around executive pay” at the UK’s largest listed companies, which “has resulted in widespread scepticism and loss of public confidence.
“The IoD has warned for some time that executive pay at the UK’s biggest companies is posing a threat to the reputation of all businesses, and we’ve called on boards to simplify and moderate pay.
“The year’s AGM season will be a big test for the FTSE. If boards don’t get out in front of shareholder and public anger, they will only push politicians closer to regulating.”