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Government Announces Corporate Governance Reforms

In the coming months the Government will introduce new laws to require:

  • around 900 listed companies to annually publish and justify the pay ratio between CEOs and their average UK worker,
  • all companies of a significant size to publicly explain how their directors take employees’ and shareholders’ interests into account, and
  • all large companies to make their responsible business arrangements public.


“One of Britain’s biggest assets in competing in the global economy is our deserved reputation for being a dependable and confident place in which to do business,” commented Business Secretary Greg Clark. “Our legal system, our framework of company law and our standards of corporate governance have long been admired around the world.”

“We have maintained such a reputation by keeping our corporate governance framework under review,” he added. “Today’s reforms will build on our strong reputation and ensure our largest companies are more transparent and accountable to their employees and shareholders.”

The reforms also seek to ensure employees’ interests are better represented at board level of listed companies, and the Financial Reporting Council (FRC) will be asked to introduce a new requirement to its code to achieve this.

Under the code’s ‘comply or explain’ basis, firms would have to either:

  • assign a non-executive director to represent employees,
  • create an employee advisory council,
  • or nominate a director from the workforce.


The FRC will also be asked to work with the business community and the Government to develop a voluntary set of corporate governance principles for large private companies.

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