Big private companies could be governed by more stringent governance rules under proposals being considered by ministers.
They may become subject to the same requirements applied to public companies under a code overseen by the Financial Reporting Council. The present code includes ensuring that executive pay in listed companies promotes the “long-term success of the company” and that “no one individual should have unfettered powers”.
The option is set to be included in a government green paper being drawn up as part of an attempt to improve the running of boardrooms after scandals such as the collapse of BHS. Arcadia, Sir Philip Green’s retail group and the former owner of BHS, would probably be affected by the changes. They could apply to other private groups, too, including the John Lewis Partnership and Virgin Atlantic.
The FRC had proposed being in the driving seat in the development of a code “directly applicable to the governance arrangements of large private companies” in recent evidence to MPs on the business, energy and industrial strategy committee, which is holding an inquiry into corporate governance. A consultation would be held before formal proposals are drawn up.
The government is also considering other ways to curtail the excesses of British business, such as binding votes for shareholders to block large bonuses and share incentive awards and forcing companies to publish the pay ratio between a chief executive and the average worker.