The research team focused on those companies required to report under The Companies (Miscellaneous Reporting) Regulations 2018, which capture individual companies that meet the criteria of having 2,000 employees, and / or a turnover of more than £200 million and a balance sheet of more than £2 billion. The report considers that there is room for improvement, in particular by increasing disclosure of how policies are applied in practice.

The research team identified 796 companies that discussed their corporate governance arrangements in the annual report. Of these, 454 (57%) had applied a corporate governance code and 348 (44%) were determined to have followed the Wates Principles.

For each of the Wates Principles reporters, the research team evaluated the cross-referencing to other parts of the Annual Report such as the s172(1) statement, the readability of the report, and how clear and informative the disclosure was under each of the six Principles. The report includes examples of disclosure that successfully answer recommendations of the Wates Principles. The research team found that companies did not always explain each of the Principles, with the proportion of companies including some disclosure in regard to each Principle as follows:

• Principle 1 – Purpose and Leadership – 88%
• Principle 2 – Board Composition – 91%
• Principle 3 – Director Responsibilities – 96%
• Principle 4 – Opportunity and Risk – 93%
• Principle 5 – Remuneration – 90%
• Principle 6 – Stakeholder Relationships and Engagement – 95%

For each Principle the research team found that there was a low level of companies meeting all the granular disclosure elements recommended by the Wates Principles, with average disclosure scores less than 50%. The report includes three key recommendations for companies:

• Disclose more detailed information in relation to the application of the six Principles to provide readers with a comprehensive understanding of the corporate governance arrangements in place and how these are mapped to the respective Principles;
• Discuss more instances and/or circumstances relating to a given corporate governance practice to evidence how they have applied the Principles;
• Use more cross-references, as in several cases the disclosure of some items could be found in other sections of the annual reports, but these were difficult to track down without the provision of cross-references.

The press release and report are available on the FRC website.