British business is facing fresh pressure to undergo major reform, with Prime Minister Theresa May pledging to overhaul capitalism and revamp corporate governance.
The influential Institute of Directors (IoD) has added to the clamour for change by calling for a review of corporate governance, while the Investment Association will today call for greater pay disclosure at the top of companies.
Yesterday, a spokesperson for May said the Prime Minister wants to "tackle corporate irresponsibility and reform capitalism to make sure it works for everyone, not just the privileged few".
May's comments come after a joint inquiry by the work and pensions select committee and the business, innovation and skills select committee into the failure of BHS slammed its former owner Sir Philip Green as the “unacceptable face of capitalism."
The inquiry found that failures in corporate governance were partly to blame for the sale of BHS to Dominic Chappell, branded a "chancer" by MPs.
“The business community will be very worried about the damage this episode will do to public faith in capitalism. Now is the time to take a fresh look at how large private-owned companies are governed. Just because a company is not listed on the stock market it does not mean there is no public interest in how it is run,” said Oliver Parry, Head of Corporate Governance at the IoD.
The IoD has recommended that the new Prime Minister launch a review into UK corporate governance. Parry added: “After damning reports into BHS, and last week Sports Direct, there is a pressing need to work out how to raise levels of trust in how British companies are overseen.”
It is in the process of updating its guidance for directors of unlisted companies, to be published in the autumn.
Meanwhile, Britain’s largest companies will today face calls to disclose the ratio between executive and average workforce pay.
A working party that operates under the auspices of the Investment Association is to recommend the disclosure of pay ratios but will stop short of demanding the practice be compulsory, according to Sky News.
Any recommendations are set to be voluntary, sources told Sky.
The working group is chaired by Nigel Wilson, the Legal & General chief executive, and includes Helena Morrissey, chief executive of Newton Investment Management. Their interim proposals condemned boardroom pay practices as "broken" and "not fit for purpose" and demanded an overhaul aimed at restoring public confidence in British business.