Companies are embracing the spirit of the Wates Principles

Essex Business School has conducted the first in-depth assessment of large private companies' compliance with the Miscellaneous Reporting Regulation (2018) and of the quality of reporting from those companies who follow the Wates Principles.

The research, led by Dr Silvia Gaia from the Essex Accounting Group, which was conducted with the Financial Reporting Council, shows that two-thirds of companies within the scope of the Regulations reported on corporate governance and 57% of these relied on a corporate governance code to define their arrangements. The Wates Principles are the most widely adopted corporate governance code used by large private companies.

The report shows that companies are using the Wates principles as a tool for self-reflection and improvement, and seeing the yearly governance reporting as an opportunity, not a burden. This research also includes examples of good reporting and acknowledges that it is too early to draw too many conclusions as most companies were in their first cycle of reporting.

Sir James Wates, Chair of the Wates Principles Coalition Group, said: “This research gives us a valuable insight into how the Wates Principles are being applied, providing, in particular, the timely and rigorous analysis we need to inform public policy decisions about corporate governance. The research shows companies are grasping the spirit of the Wates Principles, and I would expect them to use this report to guide continual improvements in their reporting.”

Dr Silvia Gaia, Senior Lecturer in Accounting at Essex Business School led the research team. She said: “Our research found that companies that use the Wates Principles have been providing good levels of disclosure in terms of general information about their formal policies but relatively lower levels of disclosure when it came to how these policies are applied in practice. Overall, there is room for improvement in reporting, and we hope that some of the points raised in this report will help companies, even those not subject to the Regulations, demonstrate good practice and make improvements going forward.”

Sir Jon Thompson, FRC CEO said: “We are pleased to see many private companies using the Wates Principles to communicate relevant information to their stakeholders about how they are governed, with an appropriate level of detail, using clear and understandable language. This is a positive first result. We hope that companies will build on this good start and continue to improve in practice and reporting in the future.”

This project draws from the Essex Accounting Group’s research stream and expertise on capital market, audit, reporting and regulation. The research group seeks to support companies and policymakers in improving their reporting and disclosure practices & policies, such as those relating to corporate governance and other elements of non-financial reporting.

The research team was:

Silvia Gaia, Essex Business School, University of Essex

Diogenis Baboukardos, Audencia Business School

Francesca Cuomo, Norwich Business School, University of East Anglia

Giovanna Michelon, School of Accounting and Finance, University of Bristol

Teerooven Soobaroyen, Essex Business School, University of Essex