New corporate reporting rules, recently released, would seem to confirm the UK government believes that old adage – beloved of CEOs in their introductions to the annual report and accounts – that “our people are our greatest assets”. (Their sincerity is rather too often swiftly undermined by descriptions of the latest restructuring for ‘optimalisation’ that follow in the management review.)
First up, in July the Financial Reporting Council released the new UK Corporate Governance Code, aiming to “put the relationships between companies, shareholders and stakeholders at the heart of long-term sustainable growth in the UK economy.” A quarter of a century on from the original Cadbury Code, the emphasis is even more on building trust and strong stakeholder relationships. See here for the highlights – all about establishing a corporate culture aligned with the company purpose and business strategy, one that promotes integrity and values diversity. Again, the talk is all about principles, applied flexibly, not a rigid set of rules.
Yet in one area, employees, the Code is highly specific. Large companies are now required to engage the workforce in decision-making, through some combination of an employee director on the board, an advisory panel or a designated non-executive director. Those with long memories will recall the firm promise by Theresa May in her July 2016 leadership bid: “If I’m Prime Minister, we’re going to change [the] system – and we’re going to have not just consumers represented on company boards, but employees as well.” Well, not quite, as it turns out. (I wrote about her u-turn on that point soon after here.)
The second big change is a set of rules about mandatory reporting each year of how Continue reading →