Industry leaders write to Prime Minister

The heads of the International Corporate Governance Network, IoD, ICSA and the TUC have written to Theresa May to express their concern that although Section 172 of the Companies Act requires directors to promote the success of the company for the benefit of shareholders, and in so doing to have regard for the interests of workers, consumers and other stakeholders, there is no effective mechanism for policing this law.

This means that  if companies – particularly private companies where there is little or no institutional shareholder oversight – do abuse the law, they are not always held to account.

They called for the following:

  • Create a mechanism which allows those whose interests should supposedly be protected by the law to  make complaint and find an appropriate remedy.
  • Ensure investors and stakeholders are involved in the governance of the mechanism.
  • Strongly encourage, or mandate larger private companies to apply the principles of independence and transparency  which have worked for public companies.
  • Help encourage frameworks for executive pay which are more broadly acceptable, and recognise that it, like other aspects of corporate governance will require a long-term focus, by directors, investors, stakeholders and government.