THE VOTE FOR “BREXIT” AND THE UNEXPECTED REPERCUSSIONS FOR CORPORATE GOVERNANCE.

The choice of voters in the United Kingdom to withdraw from the European Union has ushered in a time of uncertainty for the country that will continue until article 50 is activated at some point in the year 2019. Corporate governance is possibly the one sector that is most likely to witness notably huge changes as a consequence of the referendum, despite the fact that these changes will mostly be unexpected. Jobs, economic growth, and freedom of movement are certain to be major concerns for the general public. People from all walks of life were given the opportunity to voice their opinions on the nation’s economic health and the arrangements for it via the referendum on the EU. Governance, fairness, salary and incentives for economic performance at the business level are all topics that have received a great deal of attention recently; even politicians have been obligated to tackle these concerns. Recently, the Conservative Member of Parliament for Croydon South, Chris Philp, released a document that is titled “restoring responsible ownership.” It investigated several ways to rein down executive compensation, which has reached a level that is 150 times higher than that of the typical worker. Moreover, according to findings that were presented by MCsI in July, businesses that pay their CEOs in the lowest quintile outperform those that pay their executives in the top quintile by a percentage equivalent to 39 percent. This number is derived from shareholder returns. Philp is of the opinion that the failure of some of the better-paying corporations may be partially attributed to the fact that shareholders do not really have a voice in the nomination of board members, despite the fact that in principle they do. For instance, there is evidence that even if an independent candidate is appointed to a board, they are kept in line by’social distancing,’ while others are hesitant to gain a reputation for ‘rocking the boat,’ particularly if they aspire to jobs on other boards. This is especially true if they are in competition with other candidates for jobs on other boards. philp is of the opinion that, as a result, the nominating committee need to be switched out for a shareholder committee. If they had been shareholders for more than a year, the top five shareholders in the corporation would be represented on this board. if a certain shareholder did not want the role, it would be handed down to the next greatest shareholder in line. Shareholders who refused to serve would be publicly recognized and asked to explain to their customers why they did not want this level of responsibility. According to philp’s suggestion, this shareholder committee would have the authority to choose and appoint board members, determine the compensation of the chief executive officer, and interrogate the board over the conduct, strategy, and performance of the corporation. Although it would not seem to be a significant shift at first glance, this would really constitute nothing less than a complete paradigm shift in the way that businesses are managed. As 2017 draws closer, it may be prudent to conduct a corporate governance audit with london registrars to verify that your own company’s corporate structure is compatible with the companies act 2006 as the deadline approaches.