Theresa May announces drive for 'good governance' of privately-owned companies

Large, privately-owned companies could be required to comply with the same standards of corporate governance as those listed on the stock exchange, under government plans for tackling boardroom abuses.

Theresa May indicated ministers were determined to curb the "irresponsible minority" of private firms whose "careless" behaviour left employees, pensioners and customers to suffer when they ran into trouble.

The move follows widespread public anger over BHS, which collapsed after being sold by high street tycoon Sir Philip Green for £1, with the loss of thousands of jobs and leaving company pensioners facing an uncertain future.

Under the proposals being set out by Business Secretary Greg Clark in a government green paper, the "good values" enshrined in the corporate governance code for premium listed companies would be extended to large private companies.

It could see the creation of a "bespoke" code of practice for the largest private firms with a requirement to "comply or explain" when they publish their annual accounts.

The paper also calls for reporting requirements on issues such as diversity, greenhouse gas emissions and social and community issues to be applied more consistently to all privately-owned businesses.

The corporate governance code, introduced in the 1990s in the wake of the Polly Peck scandal when the business empire of Asil Nadir collapsed with debts of more than £1 billion, includes internal controls to mitigate and manage risks as well as setting out the role of independent non-executive directors.

Speaking ahead of the green paper's publication, the Prime Minister said: "The growth of our privately-held companies should be celebrated and supported as they are a vital part of our strong economy.

"We have, however, seen an irresponsible minority of privately-held companies acting carelessly - leaving employees, customers and pension fund beneficiaries to suffer when things go wrong.

"So we will explore ways to improve and extend good governance across big business so that everybody plays by the same rules and we create an economy that works for everyone, not just the privileged few."

Ministers stressed that they would be consulting on the plans which form part of a wider package of proposals aimed at raising standards of corporate governance across all businesses.

They are expected to include measures to ensure the "voice" of employees and customers is better represented on company boards and that executive pay packages reflect company performance.

The Prime Minister has already said she wants publicly-listed companies to publish "pay ratios" - showing how much more executives receive than ordinary workers - and the proposal could be extended to cover large private companies.

Mrs May has already been accused of backtracking on earlier promises after she used her first appearance before the CBI last week to reassure employers that workers' representatives would not be imposed on company boards.

While such measures might be appropriate for some firms, she suggested others could continue to use existing board structures "complemented or supplemented by advisory councils or panels" to ensure the views of workers are represented.

The Institute of Directors (IoD) welcomed the focus of the green paper on private companies.

"The Government is right to bring a new focus to the corporate governance of unlisted companies, which at the moment is a bit of black box - we don't know what's going on in there until something goes wrong," said the IoD's head of corporate governance Oliver Parry.

"Large private companies can employ thousands of people, and frankly they need to be more transparent about how their boards are operating."

However TUC general secretary Frances O'Grady said the Prime Minister should have the confidence to take on the "big business elites" over the appointment of workers' representatives to company boards.

"Workers on boards is a policy that's tried, tested and proven in many other countries. And it will work for Britain too, helping us build a stronger and fairer economy," she said.

For Labour, shadow business secretary Clive Lewis said the green paper proposals smacked of "tokenism".

"The real test has to be whether these proposals would have saved jobs and pensions at BHS or prevented the gross mistreatment of staff at Sports Direct, and whether they'll tackle the scourge of low pay and escalated executive pay. Anything that falls short of doing that is just not good enough," he said.