CBI: 'It's right that approaches to governance evolve'

1 Dec 2016 12:32 PM

Our response to the Government's new green paper on corporate governance

The CBI commented on the publication of the Department for Business, Energy & Industrial Strategy’s new green paper on corporate governance.

Josh Hardie, CBI Deputy Director-General, said:

“The UK’s approach to corporate governance is respected around the world. British firms know that great relationships with staff, customers and communities is the cornerstone of success. However, businesses agree that legitimate concerns exist and are determined that the unacceptable behaviour of the few should not tarnish the effectiveness of the many. So it is right that approaches to governance continue to evolve to support a modern, fair economy. We look forward to working with Government to finding solutions that enhance the UK’s governance framework.

On applying corporate governance standards for public companies to large private companies

“Acting responsibly on pay and employee engagement matters as much to private businesses as PLCs. Different solutions may be needed for different ownership structures so firms will be interested to understand how recommendations can be applied in a way that works.

On employee representation

“Diversity of thought in a company helps improve decision-making and engaged employees are fundamental to business success. Businesses are already ensuring workers' voices are being heard in many effective ways. While there is no blanket solution, a good starting point is firms being able to 'comply or explain' on the approach they are taking – whether that's employees on boards, employee committees, dedicated representatives, or another model.

On publishing pay ratios

“Listed companies are already transparent about boardroom pay. Blunt pay ratios ignore that fact that different sectors naturally have a wider range of skills - and therefore pay - than others. This has the potential to be genuinely misleading and so must be thought through very carefully.

On executive pay

“Businesses shouldn't award exceptional pay for poor performance and shareholders have a key role in ensuring sensible, sustainable and reasonable pay setting policies. Introducing a targeted binding vote regime would focus attention on the most concerning cases and give shareholders the teeth to truly have the final say on top executives’ pay.”