Corporate Governance guidance for unlisted companies launched by IoD, sponsored by Deloitte

Dated: 22 November 2010

Today the Institute of Directors (IoD) has launched the first ever Corporate Governance Guidance and Principles for Unlisted Companies in the UK.

Unlisted companies make a major contribution to UK economic growth and employment. However, the corporate governance needs of unlisted companies have, to date, been relatively neglected by governance experts as well as by policy-makers. In particular, the UK Corporate Governance Code is primarily aimed at listed rather than unlisted enterprises. Today’s publication is designed to fill the void.

The IoD is delighted to acknowledge Deloitte as the sponsor in the launch of this publication.

Key Features of the Guidance and Principles:

  • This briefing provides guidance for unlisted companies on the issues involved in designing an appropriate corporate governance framework. It also presents a set of governance principles that can be followed or not. This remains a voluntary decision of each unlisted company.
  • Fourteen principles of good governance are presented on the basis of a dynamic phased approach, which takes into account the degree of openness, size, complexity and level of maturity of individual enterprises. A dynamic approach towards governance is essential, since governance frameworks must evolve over the life cycle of a business.
  • The principles provide a governance roadmap for family owners or founder-entrepreneurs as they plan the development of their companies over the corporate life cycle. These principles may be relevant for subsidiary companies and joint ventures as well. Even state-owned companies or social enterprise organisations can be inspired by the best practices laid down here.

The case for better corporate governance in unlisted companies: 

  • Many unlisted enterprises are owned and controlled by single individuals or families. Good corporate governance in this context is not primarily concerned with the relationship between boards and external shareholders (as in listed companies). Nor is it mainly about compliance with formal rules and regulations. Rather, it is about establishing a framework of company processes and attitudes that add value to the business, help build its reputation and ensure its long-term continuity and success.
  • Good corporate governance is particularly important to the shareholders of unlisted companies. In most cases, such shareholders have limited ability to sell their ownership stakes, and are therefore committed to staying with the company for the medium to long term. This increases their dependence on good governance.
  • Good governance can also play a crucial role in gaining the respect of key external stakeholders. In an environment of mounting societal scrutiny towards the business world, even unlisted companies have to devote attention to their stakeholder responsibilities. Corporate reputation will benefit from a gradually increasing transparency and accountability.
  • An effective governance framework defines roles, responsibilities and an agreed distribution of power amongst shareholders, the board, management and other stakeholders. Especially in smaller companies, it is important to recognise that the company is not an extension of the personal property of the owner.

Commenting on the Guidance and Principles, Miles Templeman, Director-General of the IoD, said:

“The financial crisis has provided a stark reminder of the need for a robust governance framework in the global banking sector. However, good governance is not only relevant for financial institutions and large listed companies. The IoD is convinced that appropriate corporate governance practices can contribute to the success of UK companies of all types and sizes, including those that are unlisted or privately held. This point is central to why we have developed these Principles and Guidance.”

Commenting on the Guidance and Principles, Stuart Counsell, Managing Partner at Deloitte, which is sponsoring the launch of the new publication, said:

“Here at Deloitte we believe passionately in the importance of the role played by unlisted companies in helping continued recovery in the UK economy. We believe that the Principles and Guidance being launched by the IoD will make a significant contribution to the governance of such companies.”

To see the full Corporate Governance Guidance and Principles for Unlisted Companies in the UK, click here: Guidance and Principles

ENDS

Contact Points

Edwin Morgan
Media Relations Manager
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
Tel: +44 (0)20 7451 3392
Mob: +44 (0)7814 386 243
Email: edwin.morgan@iod.com
Website: www.iod.com/policy

Notes to editors

  • The IoD (Institute of Directors) was founded in 1903 and obtained a Royal Charter in 1906. The IoD is a non-party political organisation with upwards of 45,000 members in the United Kingdom and overseas. Membership includes directors from right across the business spectrum – from media to manufacturing, e-business to the public and voluntary sectors. Members include CEOs of large corporations as well as entrepreneurial directors of start-up companies.
  • The IoD offers a wide range of business services which include business centre facilities (including ten UK regional centres [three in London, Reading, Birmingham, Cardiff, Manchester, Nottingham, Edinburgh and Belfast] and one each in Paris and Brussels), conferences, networking events, virtual offices and hotdesking, issues-led guides and literature, as well as free access to business information and advisory services and a comprehensive Information Centre. The IoD places great emphasis on director development and has established a certified qualification for directors – Chartered Director – as well as running specific board-level and director-level training and individual career mentoring programmes.
  • In addition, the IoD provides an effective voice to represent the interests of its members to government and key opinion-formers at the highest levels. These include ministers, constituency MPs, Select Committee members and senior civil servants. IoD policies and views are actively promoted to the national, regional and trade media.
  • For further information, visit our website: www.iod.com
  • You can also keep up to date with the latest views from the IoD on twitter.com/The_IoD and at blogs.iod.com