Board leadership

Principles for regulated companies

We have developed a set of principles that represent the minimum standards for board leadership, transparency and governance for companies operating in the water sector.

  • Transparency – reporting must meet or exceed the standards set out in the Disclosure and Transparency Rules
  • The regulated company  must act as if it is a separate public listed company
  • An effective Board is fully focused on the regulated company’s  obligations
  • There must be significant independent representation on the Board
  • Independent non-executive directors are essential to securing strong Board leadership and governance
  • In line with best practice, boards should have the appropriate balance of skills, experience, independence and knowledge of the company
  • The Chairman must be independent of management and investors
  • Board committees, including but not limited to audit and remuneration committees will operate at the regulated company level
  • There should be a majority of independent members on the audit and remuneration committees
  • The group structure must be explained in a way that is clear and simple to understand

We have introduced a self-regulatory approach, where companies’ Boards take the lead in setting out how they meet or exceed our principles.

Principles for holding companies

We have also developed a set of principles for holding companies. The holding company is the company which the regulated company states in its accounts to be its Ultimate Parent Undertaking and Controlling Party (and any intermediate companies between that company and the regulated company).

  • Transparency – the key to maintaining customer legitimacy and confidence
    • The holding company structure should be transparent, and explained in a way that is clear and simple to understand
    • The holding company will provide information on debt and equity structures
    • The holding company will transparently demonstrate directors’ interests and the nature of those interests (other than where they are declared at the regulated company level)
    • The holding company will explain which matters that impact on the regulated company are reserved to the holding company board
    • The holding company will transparently demonstrate the governance standards that it applies, including how it meets these principles
  • Managing risk – the holding company will manage its risks in such a way that the regulated company is protected from risk elsewhere in the group
    • The holding company will not put the obligations and requirements of the regulated company at risk
    • The holding company should provide the regulated company with the information that it reasonably requests about the activities of the wider group
    • The holding company should disclose any issues at the group level which may materially impact on the regulated company
    • The holding company should support the Board of the regulated company so that it is able to run the business as if it is a separate and listed public limited company
  • Supporting long-term decision making
    • The holding company should support the regulated company in operating in a sustainable way (including making long-term decisions) in line with the long-term nature of the water sector