Today, we are helping to ensure that business is a force for good

This week sees the launch of the UK’s first set of principles for the corporate governance of large private companies.

This is a watershed moment that underlines the key contribution such companies make to the economy and society in general.

Business, well done, is a force for good. Business creates the jobs, economic growth, and tax revenue that society so desperately needs. In my experience, most business leaders have an intuitive moral compass that guides them towards delivering this value.

However, while listed companies have followed a corporate governance code for many years, private firms have not had any such guidelines.

The government introduced legislation in June requiring larger private companies – which have a combined turnover of $1.6 trillion, and employ 6.2m people – to report on their corporate governance arrangements in their directors’ reports, and the Wates Corporate Governance Principles provide them with a structure for complying with that law.

Equally important, they provide companies with a tool to look themselves in the mirror, to see where they’ve done well, and where they can raise their corporate governance standards to a higher level. This can in turn result in better engagement with their stakeholder base and ultimately build trust.

Many of these companies are justifiably proud of what they are doing already; many have extensive processes in place to engage with the broad range of stakeholders that are integral to the firm’s success, and in particular to ensure that workforce concerns are addressed at board level. Our principles allow those companies to shine.

The principles are flexible and high-level, recognising that private firms often have very different ownership structures to their listed counterparts, and include guidance on application.

Good corporate governance is not about box-ticking – building the trust of stakeholders will only be achieved if companies think seriously about why they exist and how they deliver on their purpose, then explain, in their own words, how they go about implementing the principles.

So, after months of public consultation and meetings with representatives from privately-owned businesses, based on the hard work and insight of our coalition group and the Financial Reporting Council, here are the principles we have come up with.

• Purpose and leadership: an effective board develops and promotes the purpose of a company and ensures that its values, strategy, and culture align with that purpose.

• Board composition: effective board composition requires an effective chair and a balance of skills, backgrounds, experience, and knowledge, with individual directors having sufficient capacity to make a valuable contribution.

• Board responsibilities: the board and individual directors should have a clear understanding of their accountability and responsibilities. Policies and procedures should support effective decision-making and independent challenge.

• Opportunity and risk: a board should promote the long-term sustainable success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.

• Remuneration: a board should promote executive remuneration structures aligned to the long-term sustainable success of a company, taking into account pay and conditions elsewhere in the company.

• Stakeholder relationships and engagement: directors should foster effective stakeholder relationships aligned to the company’s purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.

While the hard work of developing and delivering these principles has been completed, the job of embedding them, monitoring reporting, and ensuring that they deliver the aspirations which have been set by government and regulators is only just beginning.

I am proud of the contribution to society that private companies make and confident that understanding that businesses follow a strong governance framework will enhance public trust.