Examining the Wates Principles for Large Private Companies As a Social Contract for Business-Society Relations

39 Pages Posted: 23 May 2019

See all articles by Roger Barker

Roger Barker

Institute of Directors

Iris H-Y Chiu

University College London - Faculty of Laws; ECGI

Date Written: May 22, 2019


In December 2018, a Corporate Governance Code aimed at large private companies was unveiled, the culmination of an industry-led effort in producing a set of best practices in large private companies. These standards would also facilitate compliance with the mandatory obligation for large companies, whether public or private, to publicly disclose their corporate governance arrangements. The reform introduced to require mandatory disclosure of large companies’ corporate governance arrangements followed from a significant corporate failure, BHS, in 2016. Although significant corporate failures in the UK have given rise to both business and social concerns, the UK has always looked to improving corporate governance as a proportionate remedy. The development of corporate governance policy incorporates government, business and wider collaboration, a tradition that has continued in the production of the Wates Principles for Large Private Companies. This soft law instrument is however part of wider corporate governance reforms, and large private companies that choose to adopt the Principles are asked to ‘apply and explain’. We argue that the ‘corporate governance’ solution to the problems posed by large private companies with a significant social footprint places the Wates Principles at the interstices of public-private and the economic versus ethical framing of the firm. Ultimately we argue that the ‘corporate governance’ solution cannot be understood or framed merely in the conventional theoretical paradigm of a private and economic nature. There is a need to situate the Principles within an alternative theoretical framework and we argue that the theoretical framework of the social contract is apt for analysing the Wates Principles. We derive a set of benchmark norms according to our preferred theoretical framework in order to evaluate the Wates Principles. We argue that the Principles ultimately fall short of the social expectations for the corporate governance of large private companies.

Keywords: corporate governance code, large private company, Wates Principles, social contract, controlling shareholder, concentrated ownership

JEL Classification: K2

Suggested Citation

Barker, Roger and Chiu, Iris H-Y, Examining the Wates Principles for Large Private Companies As a Social Contract for Business-Society Relations (May 22, 2019). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 453/2019, Available at SSRN: https://ssrn.com/abstract=3392524 or http://dx.doi.org/10.2139/ssrn.3392524

Roger Barker

Institute of Directors ( email )

London SW1Y 5ED
United Kingdom

Iris H-Y Chiu (Contact Author)

University College London - Faculty of Laws ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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