Companies need to be aware of additional corporate governance reporting disclosures that came into effect for financial years beginning on or after 1 January 2019. The requirements were introduced via the Companies (Miscellaneous Reporting) Regulations 2018.
The new requirements relate to engagement with employees, engagement with suppliers and customers and others in a business relationship with the company, corporate governance arrangements, CEO to workforce pay ratio, application of the company’s remuneration policy and outcomes from share-based incentive schemes. In practical terms, companies must make the additional reporting disclosures in their strategic report, directors’ report, directors’ remuneration report or on the company’s website.
The requirements apply to companies reporting on financial years starting on or after 1 January 2019 and so the first actual reporting on these requirements will begin in 2020.
Directors’ and professional advisors’ attention should be focused on the following areas:
- Executive pay: UK incorporated quoted companies to include in the directors’ remuneration report where the company has an average of more than 250 UK employees, details of the ratio of CEO pay to average pay of the UK workforce.
- Strengthening stakeholder voice: UK public and private companies to include a statement in their strategic report explaining how their directors comply with the Companies Act 2006 to have regard to employee (and other) interests, and a statement in their directors’ report on fostering relationships with suppliers, customers and others. Unquoted companies to publish this statement on their website.
- Corporate governance arrangements: Companies with either 2,000 or more employees, or a turnover of over £200 million globally and a balance sheet total of over £2 billion to disclose, on a comply or explain basis, their corporate governance arrangements in their directors’ report (unless already subject to this requirement) and unquoted companies to make this disclosure on their website as well.
Companies seeking assistance on complying with the new Regulations should consult the Wates principles, published in December 2018, which were designed to provide a framework to help large private companies comply with the new Regulations. A company adopting the principles should follow them using an “apply and explain” approach in the way that is most appropriate for the organisation.
For more information please contact Philip Chapman, Corporate Director, on 0121 227 3879 or email firstname.lastname@example.org