Corporate governance – second review of reporting against Wates Principles

The Financial Reporting Council (FRC) has published its second review of the application of the Wates Corporate Governance Principles by large private companies.

Under the Large & Medium-Sized Companies and Groups (Accounts & Report) Regulations 2008, in-scope companies are required to include a statement in their directors’ report on their corporate governance arrangements (if they are not already required to report against a specific corporate governance code, for example under the UKLRs). The requirement applies to companies which have: (i) more than 2,000 employees; and/or (ii) a turnover of more than £200 million and a balance sheet total of more than £2 billion. The Wates Principles were developed to provide large private companies with a framework to comply with these requirements.

This second review looked at reports for the financial year 2021/22 and identified how many in-scope companies included the necessary statement in their annual report and if the approach of companies in-scope at the time of the first review (published in February 2022) had changed over time.

The review found of the 1,815 in-scope companies, 69% included disclosures on their corporate governance arrangements and of the companies that included these disclosures, 44% used the Wates Principles.

The review also sets out views of the FRC and of different user groups on the quality of the disclosures and improvements which could be made.