Principles of Good Governance in family businesses Coalition Group members
l Family Business UK l Institute of Directors l Confederation of British Industry l Institute of Business Ethics l British Private Equity & Venture Capital Association
l The Investment Association l Climate Disclosure Standards Board
l The Governance Institute l Trades Union Congress
In 2021/2, the 547 companies applying the Wates Principles had a combined annual turnover totalling more than £850 billion. These companies included private equity owned, employee owned, subsidiaries of foreign corporations, and of course family businesses. What made the Wates Principles so attractive is the fact that they are flexible – six broad principles with guidance under each category of Purpose, Board Composition, Director Responsibilities, Opportunity and Risk, Remuneration, and Stakeholder Relationships and Engagement. The principles are aligned with acknowledged best practice and consistent with the UK Corporate Governance Code for premium listed companies. company to use them – the principles are broad enough to apply to organisations of any size. They are not a set of boxes to be ticked. Applying the principles requires companies to examine their own governance practices and carefully consider how they need to improve. Then companies need to explain themselves – articulating how they’ve implemented the principles in their annual report – drawing from specific examples of challenges they’ve faced in the boardroom throughout the year. It’s got to be genuine and authentic – not boilerplate language borrowed from other companies. It’s a worthwhile effort. Ultimately, if you explain your governance clearly, in simple, specific and direct language that stakeholders can understand, you will build understanding and trust with everyone you work with. Companies that genuinely apply the principles and explain how they do so are not just jumping through regulatory hoops; they are in fact improving their own governance – and as a result doing business better. You don’t have to be a large
Wates Principles Purpose - 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. The size of a board should be guided by the scale and complexity of the company. Director Responsibilities – The board and individual directors should have a clear understanding of their accountability and responsibilities. The board’s 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.
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