Governance of businesses in the construction sector is “pretty good”, Wates chairman James Wates has said.
Mr Wates told Construction News that standards are “pretty transparent” in the sector as companies are often looking to win public contracts and so abide by high standards.
This week, a number of new transparency regulations come into force, including making listed companies with more than 250 employees explain how their chief executives’ salaries compare to other company employees.
The same legislation also means all private businesses with more than 2,000 employees or £200m turnover and a £2bn balance sheet will have to report on their corporate governance arrangements.
Wates’ chairman was appointed by the government last year to draw up a set of guidelines for companies to follow when reporting on those arrangements.
Asked how he thought construction compared to other sectors, he said: “We’re all trying to compete for public contracts and therefore I think there is a standard of behaviour and ethics in our sector that’s pretty transparent and pretty clear.
“Certainly people I know, I would say behave as ethically as we [Wates] do and I think we behave pretty ethically,” he said.
An introduction to the principles said they are designed to help companies “think seriously about why they exist, how they deliver on their purpose”.
They are designed to be implemented according to an individual business’ needs and cover the areas of purpose and leadership, board compostion, director responsibility, opportunity and risk, remuneration and stakeholder relationships.
Among the issues considered but not carried into the final document was a suggestion firms should publish full details of executive remuneration. But it was decided that the guidance would say “boards should consider the benefits of greater transparency of remuneration structures and policies which will build trust from wider stakeholders”.
It has left the publication of chief executive to company median pay ratios, a now compulsory requirement for listed companies, as an optional possibility.
Mr Wates said: “You’re not going to over-pay against your peers so what we didn’t want to do is get into an arms race for salary. If you set out your policy for salary rather than putting a price tag on people, that’s the way to do it.
“That was probably the one where people had the most tension [during the designing of the principles].”
Unions also raised the idea that workers should have a place on boards, he added. The idea idea was suggested by Theresa May in 2016 but did not win the backing of the others involved in drawing up the principles.
Mr Wates said: “I think most well-run businesses would broadly follow these principles, it’s not rocket science, albeit it’s putting it into a fixed principle pyramid and the important things that make a well-governed business.
“If you’re determined to do something wrong, this isn’t going to stop it, but what this will do is shine a light on those that do it well, which is what I really want to do.”
Work on the principles was carried out with support from the Financial Reporting Council, who Mr Wates said would be the obvious body to review and monitor the implementation of the principles.
However, no organisation has been appointed to this role and the FRC has just been the subject of an independent review which recommended it be replaced by an independent statutory regulator.