On December 10, 2018, the Financial Reporting Council published the final version of the Wates Corporate Governance Principles for Large Private Companies (the Wates Principles). The first corporate governance code for unlisted companies, the Wates Principles apply to financial years starting on or after January 1, 2019. 

In particular, the Wates Principles include guidance on executive compensation and recommend that the board promote executive remuneration structures aligned to the long-term and sustainable success of the company, while also taking into account pay elsewhere in the workforce. The principles suggest that remuneration should be linked to the achievement of company strategy and should also consider the reputational risks to the company that can result from excessive rewards or inappropriate pay structures.

To Whom Do the Wates Principles Apply?

The Wates Principles aim to help those companies that are subject to the thresholds in the Companies (Miscellaneous Reporting) Regulations 2018 and now have to report on their corporate governance arrangements in their directors’ report. This new reporting requirement applies to all companies that satisfy either or both of the following conditions:

- more than 2,000 employees;

- a turnover of more than £200 million and a balance sheet of more than £2 billion.

The Wates Principles are expected to apply to an estimated 1,700 U.K. private companies.

Core Principles

The Wates Principles are made up of six core principles covering the following areas, each supplemented by associated guidance:

- purpose and leadership

- board composition

- director responsibilities

- opportunity and risk

- remuneration

- stakeholder relationships and engagement


The Wates Principles and accompanying guidance acknowledge that a one-size-fits-all approach to corporate governance in large private companies is not appropriate, given the differing ownership and management structures of private companies. The principles aim to move away from a “tick box” approach to corporate governance and instead provide broad and flexible principles, with an “apply and explain” approach to compliance. Companies should apply the principles in a way that fits their individual circumstances and explain how they have addressed each principle in the context of their own corporate governance practices.

There is no supervisory authority to oversee and enforce compliance with the Wates Principles, and the penalties for noncompliance are likely to be insufficient to ensure full compliance. However, the Financial Reporting Council has said that it hopes a wider range of companies than those required to report under the principles will follow them.

The Financial Reporting Council has indicated that it would prefer a “name and fame” approach to give credit to those companies that have complied with the new regime and followed best practice as opposed to a “name and shame” approach.