Large private companies in the UK are choosing to adopt the Wates Principles of corporate governance, but many are struggling to provide “meaningful disclosures around key areas” and there is an over-reliance on boilerplate disclosures.

They are the standout findings from the Financial Reporting Council’s (FRC) second annual assessment of the quality of reporting by companies who have chosen to follow the Wates Principles, which were introduced in 2018.

The FRC commissioned the University of Essex to survey 1,815 large private businesses that came within scope of the Miscellaneous Reporting Regulations 2018, and found 547 (30%) chose to apply Wates. Those firms had a combined income of more than £850 billion ($1,085 billion).

The “meaningful disclosures” the research wants to see include;

• defining company purpose;
• connecting that purpose to strategy, culture and values;
• explaining how stakeholder engagement affects board decision-making.

It also expressed concern that: “High levels of similarity were found between the corporate governance statements of different companies, and also between reports by the same company in different years.”

Improvements noted included more companies reporting on how their purpose aligned with their business practices and on the connection between their strategy and purpose/culture; and “more information about the Chair, how the board understands the company’s business needs and stakeholder interests, and rationale for its remuneration structure.”

“The research highlights the need for increased transparency and accountability among large private companies.”

Mark Babington, Executive Director of Regulatory Standards, FRC

Some 69% of companies within scope chose to disclose information about their corporate governance structure. And 41 companies that were original adopters of the. Wates principles but have since dropped out of scope have chosen to continue to adhere to Wates.

Mark Babington, FRC’s Executive Director of Regulatory Standards, said: “The popularity of the Wates Principles continues amongst private companies, who I hope put this report to good use in their efforts to produce meaningful and company specific reports. The research highlights the need for increased transparency and accountability among large private companies, particularly as they are a driver of growth in the UK and have a significant impact on the economy and on wider stakeholders.”