The Wates Principles: recent reporting insights – what do senior executives and board members need to know

Introduced in December 2018, the Wates Corporate Governance Principles for Large Private Companies (Wates Principles) marked a shift in corporate governance and reporting guidelines. New disclosure obligations for periods beginning on or after 1 January 2019 required directors of all large companies to explain how wider stakeholder needs were considered in performing their duties throughout the year. These changes aimed to raise governance standards beyond the listed market without imposing a rigid 'one-size-fits-all' or purely compliance-driven model.

The Financial Reporting Council (FRC) published its first review of the reporting by companies that have adopted the Wates Principles in December 2025. The report confirms that the framework has now moved beyond its introductory phase and gives practical guidance and examples of effective, high‑quality governance reporting.

What are the Wates Principles designed to do?

The Wates Principles set out six core governance standards for large UK private companies, aimed at driving long‑term success, strengthening stakeholder confidence and meeting statutory reporting duties.

Recognising that private companies range from family‑owned businesses to private equity portfolios and subsidiaries of global groups, the Wates Principles are intentionally flexible. Reporting follows an 'apply and explain' model, emphasising how the principles operate in practice rather than evidencing strict compliance.

The six Wates Principles cover:

1. Purpose and leadership: aligning strategy, values, and culture to a clearly articulated purpose.
2. Board composition: ensuring an effective chair and the right balance of skills, experience, and capacity.
3. Director responsibilities: clarifying accountability, enabling informed decisions and independent challenge.
4. Opportunity and risk: creating and preserving long‑term value with robust oversight of risks.
5. Remuneration: aligning incentives to sustainable success and wider workforce considerations.
6. Stakeholder relationships and engagement: overseeing meaningful engagement and considering stakeholder views in decision-making.

Across all six Wates Principles, the FRC emphasises the importance of outcome‑focused reporting and clear cross‑referencing to other parts of the annual report. Boards are expected to explain not only what governance structures exist, but how they contribute to long-term success in practice. Clear, concise narratives are preferred over lengthy descriptions of processes, and boards are encouraged to demonstrate judgement, accountability and strategic direction.

Areas of focus

Three of the Wates Principles particularly merit continued attention at board and senior management level: purpose and leadership, board composition and remuneration. Together, these principles sit at the heart of effective leadership and governance.

Purpose and leadership

A recurring message in the FRC’s insights is the need for boards to articulate purpose with greater clarity. High-quality reporting showed how purpose is used as a reference point in key decisions and how it shapes choices and behaviours across the business. However, purpose statements were often seen as generic statements, rather than demonstrating purpose in action.

Board composition

Reporting on board composition is most effective when it explains how the board’s collective skills, experience and leadership capacity align with the company’s strategic priorities. The FRC notes that the stronger disclosures address succession planning, capacity and effective challenge, as well as how any identified gaps are managed. This gives stakeholders a clear understanding not only who sits on the board but how the board is equipped to oversee the business and support long‑term performance.

Remuneration

Remuneration remains one of the most closely scrutinised areas of governance. The FRC encourages boards to show how remuneration arrangements support long‑term, sustainable success, reflect company values, and take account of pay and conditions across the wider workforce. Clear reporting in this area helps demonstrate that incentives are aligned with strategy and responsible value creation, rather than short‑term results. For boards, this is as much a question of credibility as it is of compliance.

Why these areas of focus matter

For senior executives, the implications of the FRC’s findings are practical, rather than theoretical:

• Governance reporting is increasingly viewed as a key indicator of leadership quality. Through Wates-aligned reporting, employees, investors and other stakeholders gain a clearer view of how the company is governed, decisions are made and risks are managed. Clear and thoughtful governance reporting strengthens trust, supports access to capital, and provides evidence of organisational maturity. For senior leaders, evidencing good governance and demonstrating that governance is not simply a compliance exercise can be an important differentiator – particularly during periods of scrutiny, transition or change.
• By contrast, poorly articulated or inconsistent narratives can undermine stakeholder confidence. They can also influence perceptions of how seriously the board and senior management team take their statutory duties, including the obligation on each director to promote the long‑term success of the company.

Recommendations

The FRC’s 2025 review is a moment for boards and executive teams to reassess the quality of their governance arrangements and reporting. The conversation is no longer about early adoption – companies are now expected to show how the Wates Principles are being applied in practice, how the business is governed and how that supports long‑term success.

When applied effectively, the Wates Principles offer more than a compliance framework – they provide a clear narrative of governance structures and how they underpin good, sustainable performance.

Many thanks to current trainee Kirsten Higgins for the help in writing this article.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2026