The Institute of Directors (IoD) has called for new governance rules for large private companies to avoid a repeat of the BHS pensions scandal.

The lobby group wants businesses like the collapsed department store chain to adhere to governance rules similar to those followed by listed companies.

The IoD, which has called for a tightening of controls as part of its election manifesto, said the move would prevent a repeat of the BHS saga.

The former high street stalwart collapsed last year with a £571m black hole in its pension scheme, leaving tens of thousands of retirement payouts in jeopardy.

BHS’ former owner Sir Philip Green was hauled before a parliamentary inquiry after he sold the business to a consortium led by three-times bankrupt Dominic Chappell.

The retailer tumbled into administration just 13 months after Chappell’s Retail Acquisitions purchased the retailer for a nominal £1.

Chappell was accused by MPs of “systematically plundering” the business while it was under his ownership.

’Extra scrutiny’

Under the IoD’s proposals, reported by The Telegraph, privately-owned firms like BHS with more than 2,000 employees would be required to follow a new corporate governance code, similar to that adhered to by public companies.

The group said the measure would “open up the ‘black box’ of governance” within such businesses.

The IoD said: “There are a number of large unlisted companies – BHS was a prominent example before it collapsed – whose size means extra scrutiny is justified.”

Its election manifesto also calls for stronger controls over executive pay, insisting that investors should be handed a bigger say over salaries in order to rebuild trust in business.

The IoD insisted that remuneration packages should be reconsidered if they are rejected by 30% of shareholders.

Altered pay packages should then be put to a second shareholder vote, the IoD said.

According to the lobby group, such a rule would increase consultation with investors over the pay of the highest-earning executives.

The IoD’s head of corporate governance Oliver Parry said: “Business has been facing a crisis of public confidence since the financial crisis, and the political impetus to intervene will not disappear, whoever is elected.

“UK corporate governance is highly regarded across the world, but there is still a pressing need to rebuild public trust in big business to work in the long-term interests of investors and employees, rather than the short-term interests of managers. Now is the time for sensible reforms.”