Prominent lobby group the Institute of Directors (IoD) has spoken out about the need for more stringent corporate governance rules for private businesses in order to avoid another BHS-style collapse.
In its election manifesto released this week, the group has called for large-scale privately-owned business to succumb to the same corporate governance rules as listed businesses.
It has proposed a scheme which would “open the black box” of corporate governance for private companies in the UK.
Any private business with over 2000 employees would be expected to either follow the corporate governance guidelines given to public companies, or be forced to explain why they have not done so.
“There are a number of large unlisted companies — BHS was a prominent example before it collapsed — whose size means extra scrutiny is justified,” the IoD said.
During the controversial collapse of BHS, it was revealed that former owner Sir Philip Green extracted £400 million from the business in dividends, £363 million of which he was forced to repay after a convoluted recovery process for the £571 million pension deficit.
Dominic Chappell, who was the last to own the for 13 months until its collapse in April 2016, is still being pursued by The Pensions Regulator for £17 million he “plundered” from the company.
Meanwhile the IoD’s election manifesto also includes demands for stricter control on executive pay following a raft of investors expressing their anger at executive remuneration through protest votes this spring.
“Business has been facing a crisis of public confidence since the financial crisis, and the political impetus to intervene will not disappear, whoever is elected,” IoD head of corporate governance Oliver Parry said.
“UK corporate governance is highly regarded across the world, but there is still a pressing need to rebuild public trust in big business to work in the long-term interests of investors and employees, rather than the short-term interests of managers.
“Now is the time for sensible reforms.”