IndexAn overview of the Green Paper proposalsThe areas covered by the reformsExecutive payHaving greater input from employees and stakeholders at all board levelsThe way corporate governance is done in large corporations privateVarious components of executive compensationCEO compensation Reporting on the ratio Other reforms focused on executive compensation Components to have greater input from employees and other stakeholders at the board level Worker input to the board Other stakeholder input to the Corporate Governance advice for large private companies The UK Government in its response to the Green Paper regarding corporate policies The governance reforms have touched on areas which will be reformed from June 2018. They will use a combination of secondary legislation and make changes to the Code of UK corporate governance together with the preparation of new guidance and other initiatives in specific areas of focus. The only sector that the reforms do not affect is foreign companies listed on the stock exchange, which could be affected by the reforms. Therefore, this article seeks to provide an analysis that will identify whether reforms are the best path forward for the UK government. A list of companies and how they are affected by the reforms will also be highlighted. The suitability of the reforms will be determined by examining the overall impact of the reforms in the various sectors. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay An overview of the Green Paper proposals Although the government itself has argued that the Green Paper reforms are a combination of the best corporate governance reforms, which is with the exception of mandatory reporting of the ratio of CEO pay. Pay corresponds to the average company salary in the UK and not the global workforce, most of the reforms are an adaptation of existing policies and principles of current corporate governance. Therefore, most companies may not even see the reforms as a challenge or a new introduction to their current governance processes. However, it is also worth noting that most of the negative responses to the Green Paper put in place by the government came from most of these companies that are expected to be affected by the ongoing reforms. Therefore, companies are expected to implement reforms regardless of their opinions, so they must be aware of the amount of corporate governance reporting expected of them. The reforms mainly affect large private companies in the UK which in most cases have even voluntarily made their internal governance arrangements public, so they will not feel like they have to deal with any routine mandatory regulation or “soft law” on the matter of governance. Just as they did voluntarily, as part of these new reforms, they will now have to regularly disclose their corporate governance arrangements. Areas covered by reforms The Green Paper reforms cover three specific areas: executive pay, employee and stakeholder input at board level, and corporate governance in large private companies. Executive CompensationWhen it comes to executive compensation, several companies have the opportunity to respond to their shareholders about opposing views on executive compensation, the responsibilities of compensation committees,on their Reporting on the remuneration ratios of CEOs, their clearer information regarding the shared incentive components of the remuneration policies and the increase in the vesting and holding periods for remuneration based on shares of the same companies. Having more input from employees and stakeholders at all levels of the board of directors At this stage, the reforms aim to have more input from employees and all stakeholders at board level, so that even their interests are taken into consideration in every decision-making process. Therefore the reform will involve mandatory disclosure of how each company's board members consider/treat the interests of non-shareholders and various initiatives and adoptions by board members of approaches to employee engagement and various informal guidelines that put relating stakeholders and employee engagement in the daily operations of each company. Therefore, the reform will ensure that companies involve many, if not all, stakeholders when making board decisions on matters that affect every employee and stakeholder of each company. In this way, governance will be all-encompassing and therefore everyone in the company will feel valued and part of the organization. Modes of corporate governance in large private companies At this level, reforms related to the introduction of new corporate governance of private sector companies require them to disclose their modes of corporate governance just like any other company. The government's response to the Green Paper also touches on possible reform, which includes strengthening the supervisory mandates of the Financial Reporting Council (the “FRC”) with regards to corporate governance reporting. Finally, the government has decided that it will not implement only the two recommendations that usually come from the BEIS parliamentary committee regarding diversity issues, according to which: From May 2020, women should make up at least half of the appointments of executive management positions in both the FTSE350 and all listed companies. Furthermore, every FTSE100 company should be required by law to publish data on their workforce showing a detailed breakdown of how they cover ethnicity and pay bands. These proposals will ensure that the realization of gender equality is achieved in every company regarding their appointments in various positions of power. This way, other women in the society will also be challenged to work hard to be appointed to such positions. On the women's target, the Government seeks to ensure that it maintains its focus on achieving the Davies target. Review target that by 2020 women will make up both 33% of FTSE board members and 33% of executive committees and each of their direct reports. Regarding diversity reporting, the Government seeks to ensure that there is a voluntary approach supported by the works of Sir John Parker and the reviews and recommendations of Baroness Ruby Macgregor-Smith (Davies, Teitt and Nwokora 2015), as well as the new government-sponsored corporate diversity and inclusion group.Various components of executive compensationChief Executive Pay Ratio ReportReforms in this area will address some of the mandatory information on the remuneration of various directors of specific companies with regards to the CEO's report ratio of The CEO's salary corresponds to the average salary expected for the company he operateswithin the UK workforce. It also provides a detailed explanation of the changes that should be made to the ratio from year to year and how these specific ratios relate to the salary conditions of the country's entire workforce. There have been debates related to these reforms, and other people have also criticized them since they were introduced by the "Goldman Sachs" flaw, commonly referred to as the pay ratio for the CEO of a company like Gold Sachs, which may seem extreme due to the generally high level of most company employees where CEO pay is always higher than that of employees doing the physical work. This type of information can be misleading when it comes to providing accurate information about the overall salaries of your company's workforce. It is not surprising that almost 75% of listed companies that commented on the Green Paper proposals opposed this reform. The report will be used to calculate the remuneration of UK employees only on the basis of the CEO's total annual remuneration, i.e. the "single figure" which must be indicated in the CEO's remuneration report. By applying this report, it can be hoped that there is no potential uncertainty regarding the UK's gender pay gap laws, even with non-UK workers. Therefore, multinational companies will also be free to publish, in addition to the report provided by the UK government, any other broader report that also covers non-UK employees. The newly proposed CEO salary reporting requirements will meet the current requirements that Since 2013, the principle has been in place that the salary reports of directors of listed companies in the country disclose the annual increase in the salaries of their CEOs compared to previous years in relation to each annual increase in the average salary of the entire workforce. However, when comparing the disclosure of the proposed CEO compensation ratio, many companies may now inappropriately use various comparators of each employee. Therefore, it will be necessary for each company to explain why it used a different group. Other reforms focusing on executive pay The government also suggests introducing a requirement for every listed company to provide a detailed explanation of its remuneration policies through secondary legislation. Such policies would have to be approved by shareholders through a simple majority vote based on UK law, which could lead to a different outcome to what the UK government and many other stakeholders see as complex share-based incentive schemes that most part of the companies commonly adopt as part of the remuneration policies of the executives who work in each company. Other changes/reforms in this section include various changes to the current Governance Code for which the FRC has primary responsibility and oversight. Therefore, the Government will ask the FRC as part of the review of the Governance Codes and other relevant guidance. Components to have greater input from employees and other stakeholders at the board level. Workers' input to the council Prior to the publication of the Government's Green Paper, there was much discussion in the past about whether the UK Government would introduce a requirement, as seen in other jurisdictions, for the Director of Workers' Representatives to be appointed by members of the company's board of directors.However, the Green Paper proposed that companies should adopt one of three possible “worker/stakeholder engagement” approaches that can help provide workforce and other stakeholders with much greater input at each board meeting/level. The three approaches are: First, some non-executive directors of each company are assigned the responsibility of ensuring that board members always listen to the voice of stakeholders. Secondly, stakeholder advisory committees can be created, and thirdly, one or some stakeholders can be appointed as representatives of others on the board. The government's response is a synthesis of the many concerns that each of the three responsibilities has. For example, there is a possibility that they may create a conflict of interest, there may be difficulty in choosing the right person to take on the role of representative and they may also have a negative impact on the unitary nature of the respective boards of directors. and their effectiveness in terms of operation. However, the UK Government has asked the FRC to proceed with a consultation on the composition of the Government Code on the new requirements for listed companies to follow and how to adhere to the Code. Therefore, one of the worker-stakeholder approaches. Contributions from other stakeholders to the board of directors The government has suggested strengthening the engagement of various stakeholders in many companies using various disclosures and guidance measures. So the involvement of stakeholders of companies that exist in the UK is something that the Companies Act 2006 recognizes by requiring directors to respect the interests of other non-shareholder stakeholders such as the employees, customers and suppliers of a particular company when exercising their principal statutory role act in a way that promotes the success of each company (Clark & ​​​​Knight 2008). A significant change suggested is that, using secondary legislation, both private and public companies are required to disclose how their The board of directors has complied with this provision which aims to ensure that the interests of employees and stakeholders are taken into account when making key decisions. However, the government also argues that the implementation of the new requirements will be subject to other new considerations. Therefore, at this stage where actual implementation has not taken place, it will be a little difficult to be sure that every company will fully comply and provide the necessary disclosure. The Government, however, believes that the process will involve explaining how each company's key stakeholders will have been identified, how their views will be sought, why engagement approaches have been deemed most appropriate, and how the information obtained from them influenced the decision-making process of boards of directors. Corporate Governance for Large Private Companies While most large private companies may choose to follow and voluntarily comply with the Green Paper requirements to disclose their corporate governance, together with disclosure of applicable corporate social responsibility programs in accordance with the Monitoring Group guidelines which seek to ensure that there is disclosure of portfolio companies and holding companies although none has been mandatory. The reforms implemented by the government would change by providing, through the use of secondary legislation, that every company, both private and public, with at least 1,000 employees in the private sector and 2,000 employees in the public sector makes.