The Government are planning to improve the UK’s corporate governance framework to ensure this country remains one of the best places to start and grow a small business.
Still at consultation stage, the Government are looking to get the highest standards of behaviour from those who lead and control companies in or approaching insolvency. That said they do concede the vast majority of companies are run fairly and responsibility but a small number of recent failures have raised concerns that company directors can ‘unfairly shield themselves from the effects of insolvency’. In the worse cases they claim they (directors) may even be able to profit from a business failure while workers and small suppliers lose out…..who can they be referring to?
The proposals being considered are:
• clawing back money for creditors including workers and small suppliers by reversing inappropriate asset stripping of companies on the verge of insolvency
• disqualifying and or holding directors personally liable when found to have sold a struggling company or subsidiary recklessly or knowing it would fail
• giving the Insolvency Service new powers to investigate directors of dissolved companies
• consideration of the legal and technical framework within which decisions are made on payment of dividends, and how it could be improved and made more transparent
• Strengthening the role and responsibilities of shareholders in stewarding the companies in which they have investments.
The Government is already taking action by:
• considering whether further action is needed to prevent the misuse of contract clauses, typically in the construction sector, allowing large firms to withhold payments as a surety against defects
• committing to launch a call for evidence on how to eliminate unfair payment practices to small businesses.
This package of reforms follows last year’s corporate governance reforms which sought to increase boardroom accountability.
According to the press release from Business Secretary – Greg Clark, the Government has already taken action as follows:
• supported the Investment Association’s world-first public register of FTSE-listed companies where more than one fifth of shareholders have opposed resolutions on executive pay packages and other issues
• appointed James Wates to chair a new group drawing up the UK’s first-ever set of corporate governance principles for large private companies
• ensuring that employee and other stakeholder voices are heard and taken into account in boardroom decision-making
In the coming months the government will introduce new laws requiring:
• listed companies to reveal the pay ratio between bosses and employees
• all companies of a significant size to publicly explain how their directors take employees’ and other stakeholders’ interests into account
• all companies of a significant size to make their corporate governance arrangements public
Maybe this has been prompted by the recent collapse of Carillion or maybe these actions were already in the pipeline, but the fact that this is too late to have any impact on the 1,700 who lost their jobs and the thousands of small business creditors affected by that collapse is indisputable.