A UK parliamentary committee has called for a voluntary code for large private companies to improve the governance of unlisted firms – including ensuring they pay adequately towards their pension schemes.

The Business, Energy, and Industrial Strategy Committee – a group of MPs from the UK parliament’s lower house – published the results of its work on corporate governance this morning.

It proposed that the Financial Reporting Council (FRC), Institute of Directors, and Institute for Family Business should develop an “appropriate” voluntary code of conduct for the largest privately owned companies. Initially, this would cover firms with 2,000 employees or more, the MPs said.

The committee advocated a “light touch” approach to overseeing the code. Oversight should be given to a dedicated new body, the MPs said. They recommended measures for transparency about pension scheme contributions, revenues, corporate structure, remuneration, number of employees, and directors’ duty to promote the success of the company.

“Should this voluntary regime fail to raise standards after a three-year period, or reveal high rates of unacceptable non-compliance, then a mandatory regulatory regime should be introduced,” the committee said.

The measures were influenced by the collapse of high street department store BHS, and the subsequent uncertainty regarding the future of its pension scheme. At the end of February, former owner Sir Philip Green agreed a £363m (€424.6m) rescue package for the scheme to keep it out of the Pension Protection Fund.

Iain Wright MP, chair of the Business, Energy and Industrial Strategy Committee, said: “The collapse of BHS highlighted the damage that private companies can do. A new code for private companies will help to ensure that high standards of corporate behaviour are observed by our leading firms, improving their public reputation and making them more attractive to investment.”

In addition, the committee recommended a “major expansion” of powers for the FRC. It criticised “very weak enforcement mechanisms” and proposed new powers for the FRC to tackle poor practice and improve corporate governance performance.

In the summary of its report, the committee said: “While supporting the current ‘comply or explain’ basis of the UK Corporate Governance Code, we propose a series of reforms designed to require directors to take more seriously their duties to comply with the law and the code relating to corporate governance. These include requirements relating to more specific and accurate reporting, better engagement between boards and shareholders, and more accountable non-executive directors.”

The FRC welcomed the committee’s report in a statement, adding: “In undertaking its consultation, the FRC will take account of the committee’s recommendations and the government’s response, and assess their implications on the FRC’s remit, resources and funding model.”

The FRC is planning a review of the UK Corporate Governance Code later this year.