March 23, 2026 The FRC’s First Insights into the Wates Principles and What They Signal for Large Private Companies
When the Financial Reporting Council (“FRC”) assumed responsibility for the Wates Principles earlier this year, many governance professionals were curious to see how the regulator would approach a framework deliberately designed to be flexible. Its first set of reporting insights, published in December 2025, offers a clearer sense of that direction.
What stands out is not a shift in expectations but a renewed focus on thoughtful, outcome‑based disclosure. For those of us advising large private companies day to day, the message is consistent: the Wates Principles remain principles-led, but the bar for meaningful reporting is rising.
A renewed emphasis on clarity over volume
One theme is repeated throughout the FRC’s analysis: disclosures are often too generic – purpose statements that describe the existence of a purpose but not what it actually is; Board composition sections that list directors but reveal little about how they contribute; and remuneration reporting that asserts alignment with strategy but does not illustrate how, to name just a few examples.
This will resonate with anyone who has wrestled with governance sections drafted by different teams in isolation. The FRC explicitly calls out this fragmentation, encouraging companies to treat the annual report as a coherent narrative.
For the clients that Elemental supports, this is where practical coordination pays off. When purpose, strategy, governance and stakeholder engagement are treated as connected topics rather than separate compliance exercises, reports become shorter, clearer and more persuasive.
Purpose and leadership: moving beyond slogans
Principle One on purpose and leadership remains an area of weakness. The FRC notes that many companies simply assert their purpose without providing examples of how the board actually uses it to guide decision‑making. Culture reporting shows similar gaps, with limited reflection on outcomes.
The report also highlights companies that connect purpose to board-level decisions, internal communication and workforce behaviours. These examples reinforce something we see in practice every day: authentic purpose is rarely created in the boardroom, but it is shaped, challenged and embedded there. This is the kind of detail that makes reporting meaningful rather than aspirational.
Board composition: specificity builds trust
The FRC is clear that boilerplate descriptions of board composition are no longer enough. A statement that “the company has a non‑executive director” offers little insight into how challenges are addressed or how the board uses an external perspective.
Where companies are part of complex groups, the regulator encourages entity‑level clarity about who actually governs the business. This is an important point for private companies with group oversight structures that differ from their legal boards. We frequently work with clients whose governance is influenced (positively or otherwise) by parent companies abroad. Transparent reporting on those dynamics does not weaken governance; it demonstrates maturity.
The FRC also pushes for honest disclosure on gaps in board skills and diversity, together with how companies plan to address them. Not every private company can recruit a perfectly balanced board, particularly family-owned groups, but the willingness to acknowledge limitations is increasingly seen as good governance rather than risk.
Directors’ responsibilities: a clearer picture of how decisions are made
Principle Three, covering accountability and governance processes, appears stronger across the sample. Companies are beginning to provide more insight into their committees, decision pathways, and the information directors receive. The FRC encourages this further, particularly in clarifying who in the organisation holds responsibility for long‑term success.
In our experience, many large private companies have well-developed internal controls but struggle to articulate them succinctly. The FRC’s examples show that effective reporting does not require exhaustive detail, just clarity: who decides, how they decide and what informs them. This is often where external governance support can help translate operational processes into an accessible narrative without overcomplicating the report.
Risk and opportunity: generally strong, but uneven on opportunity
The FRC notes that companies tend to report more confidently on risk than on opportunity. This is unsurprising; risk processes are embedded, while opportunity identification often sits within strategic planning cycles that are less formally documented.
What the regulator is looking for is not commercially sensitive disclosure but visibility of process. Who considers opportunities? How often? How are they challenged? For many clients, this is a chance to reflect on whether opportunity identification is as structured as risk management. If it is not, the reporting gap may reflect a governance gap worth addressing.
Remuneration: the cultural hurdle remains
Remuneration reporting continues to lag behind other principles. The FRC attributes this partly to cultural discomfort with pay transparency in private companies. It does not call for specific figures but emphasises that stakeholders need to understand how executive pay is shaped and how it supports long‑term success.
Some companies demonstrate this by explaining the weightings between short‑term and long‑term incentives, the role of committees and how strategic priorities influence reward outcomes. For private companies used to closed-door remuneration decisions, this can feel like unfamiliar territory, but the direction of travel is unmistakable. As advisers, we often encourage boards to focus on describing rationale rather than numbers: why decisions were made, not simply what they cost.
Stakeholder engagement: a relative strength, but still room to connect the dots
Principle Six on stakeholder engagement emerges as one of the stronger areas, with companies more comfortable explaining how they engage with stakeholders and what issues are raised. The next step, encouraged by the FRC, is clearer reporting of outcomes and board decisions arising from that engagement.
The reminder to cross‑reference section 172 statements is particularly useful. For many companies, these disclosures overlap extensively, and thoughtful cross-referencing can reduce duplication and improve coherence.
A direction that rewards authenticity
What the FRC’s first insights show is not a tightening regime but a maturing one. The Wates Principles remain proportionate and adaptable, but expectations around articulation, relevance and outcome‑focused reporting are increasing. None of this requires more pages, just more intention.
For large private companies, especially those preparing for future investment or a potential IPO, this is an opportunity. Governance reporting that genuinely reflects how a board leads and decides is not only more compliant; it is more compelling.
How can Elemental support?
As we look ahead to the next reporting cycle, the most valuable step many boards can take is simply to pause and reflect on the story they are trying to tell. The Wates framework is flexible, but it rewards companies that use that flexibility to explain themselves honestly. That is a conversation we find ourselves having more often with clients, and one that tends to lead to clearer governance, not just clearer reports. Together with our clients, we achieve this by:
- Creating coherent, connected reports by aligning purpose, strategy, governance and stakeholder engagement into a single narrative rather than fragmented inputs from multiple teams.
- Strengthening purpose and leadership disclosures by helping boards articulate how purpose influences decision‑making, culture and behaviours in practice.
- Improving entity‑level governance clarity, especially in complex group structures, explaining who governs, how oversight works and where independent challenge comes from.
- Mapping and articulating decision‑making pathways so disclosures clearly describe who decides, how decisions are made and what information supports them.
- Enhancing risk and opportunity reporting, helping companies evidence opportunity identification processes without revealing commercially sensitive details.
- Supporting clearer remuneration reporting by focusing on rationale, governance and alignment with long‑term success rather than numerical disclosures.
- Strengthening stakeholder engagement sections by evidencing outcomes, board responses and streamlining overlaps with s.172 disclosures.
- Support authentic, outcome‑focused reporting overall, helping companies use the flexibility of Wates to tell a clear, honest governance story that builds confidence with stakeholders.
If you are reviewing your governance reporting ahead of year‑end and would like to explore how these themes apply to your organisation, please get in touch with us at Elemental. Visit here to find out more about our corporate governance services.
