MPs have called for some private companies to adhere to the same corporate governance and reporting standards required of listed companies to avoid a repeat of the BHS controversy.
Reporting recommendations would apply to private companies that have “an important social impact” and those with more than 5,000 defined benefit pension scheme members, the work and pensions select committee has said.
The report also said company directors should have a new duty to pension fund trustees and for insolvency reports to be published in the public interest.
These changes are part of a Government effort to reduce the chance of a company collapsing in the manner of home services provider BHS.
An inquiry into the company demonstrated that poor corporate governance and lack of publicly available information were contributing factors to BHS’s enormous pension scheme deficit and eventual collapse.
The committee has recommended that company directors must be better held to account, and that a publicly listed companies must comply with the Financial Reporting Council (FRC) corporate governance code and its reporting requirements or publicly explain why they are not.
Larger private companies, which have been designated as large by the Government or that have more than 5,000 defined benefit pension scheme members, should also be made to adhere to the FRC corporate governance code or explain why they will not comply.
Pension scheme trustees should also be added to the list of stakeholders that company directors must have regard to in an effort to “increase the chances both that directors would take into account the interests of current and future pensioners in carrying out their duties, and that those who have failed to do so will be held accountable in the courts”.
Companies should also be made to publish insolvency service investigation reports to the public.
Frank Field, chairman of the committee, said: "For a company with a big social and economic footprint like BHS it is simply not enough to be accountable to shareholders – particularly when one shareholder owns most of the stock."
The collapse of BHS put 11,000 people out of work and left a £571m pension deficit affecting 20,000 pensioners facing an uncertain financial future, which Mr Field called “a result of gross failures of corporate governance”.
“Would the story have played out the same way if its directors had to be open about the financial decisions they were making for its future? The finances and leadership of a company with so many people depending on it should be open to scrutiny," he said.