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On Monday the Institute of Directors (IoD) 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. This new publication is designed to fill the void.

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.
  • A key step in the development of unlisted company governance is the decision to invite external directors onto the board. Its effect on boardroom behaviour and culture should not be underestimated.

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

2 Responses to “Institute of Directors Launch UK Corporate Governance Guidance for Unlisted Companies”

  1. James Green says:

    This is not an IoD site, I was just reporting the publication. I doubt that the IoD will be able or willing to supply email addresses (Data Protection issues) but you can try contacting them directly: http://www.iod.com will get you the contact details.

  2. Phil Baker says:

    Dear IOD,
    one of the academics I support and who attended this event, Dr Arad Reisberg, is seeking e-mail contact addresses for those who attended – do you have these, and can I obtain a copy for him?
    I have looked on the internet, but many addresses do not seem to be available.

    Many Thanks,
    Phil Baker.

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