Review of the Wates Corporate Governance Principles

29 March 2021

The Wates Principles were introduced in 2018 to help large private companies comply with the new corporate governance requirements for reporting periods commencing after 1 January 2019. Sir James Wates has published an article providing some insight into how companies have reported against them.

Positives

In general, the Wates Principles have been well received and companies have used their annual Directors’ Report to showcase the positive steps they have taken to improve their own governance.

Good reports included:

rigorous analyses of how the Wates Principles had been applied;
cross-referencing to other parts of their Directors’ Report, helping to keep the Wates Principles reporting concise, pitched at the right level of detail, and focused on what had changed compared to the prior year; and
illustrative examples of issues that boards are grappling with.

Disappointments

Overall, while those companies reviewed generally stated what their ‘purpose’ is, their reporting often failed to provide specific examples of how the ‘purpose’ had guided Board-level discussions and decisions.

In addition, whilst companies included a Corporate Governance statement in the annual report, it was often hidden on the website.

Future expectations

As companies become comfortable with the process of applying the Wates Principles throughout all board meetings and not just at year end, there will be an improvement in the quality of reporting. The Financial Reporting Council and the Coalition Group will work together on a research project to monitor the reporting to date and focus on highlighting and promoting good practice in the future.

In concluding his assessment and setting out his expectations for future reporting, Sir James Wates reinforced the following ‘common sense’ principles of good communication that should apply to all corporate governance reporting: