The Company Secretary's role
in Corporate Governance
Ann Clayton C Dir FCMI ACISI
AKB Consultancy Limited
Non-Executive Director
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THIS EVENING
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The Role of the Board
Good Governance
Role the Company Secretary plays
Questions
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THE BOARD IS THE
CUSTODIAN OF THE
ORGANISATION
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IT’S ROLE IS:
TO PROVIDE THE
LEADERSHIP OF THE
COMPANY
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IT MUST ACT IN A WAY IT
CONSIDERS, IN GOOD FAITH,
MOST LIKELY TO PROMOTE
THE SUCCESS OF THE
COMPANY FOR THE BENEFIT
OF ITS MEMBERS AS A WHOLE
The IoD Director’s Handbook
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CORPORATE GOVERNANCE
1992 ~ Cadbury
1995 ~ Greenbury
1998 ~ Hampel
1998 ~ 1st Combined Code
1999 ~ Turnbull
2003 ~ Higgs and Smith
2009 ~ Walker
2010 ~ FRC Combined Code
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The responsibilities of the board
include
• the setting of the company’s strategic aims
• providing the leadership to put them into
effect
• supervising the management of the
business
• and reporting to the shareholders on their
stewardship.
Cadbury Committee Report on Corporate Governance para 2.5. 1992
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COMBINED CODE
• Written as ‘One size fits all’
• Written for Listed Companies
• Focuses primarily on safeguarding
external shareholders
• ‘Comply or explain’ to Regulators
• Short term gain for shareholders or long
term sustainability
• Seen by small organisations as time
consuming and costly…. for what benefit?
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CORPORATE GOVERNANCE
GUIDANCE AND PRINCIPLES
FOR UNLISTED COMPANIES IN
EUROPE
Produced by ICSA & European Confederation of Directors
Associations in March 2010
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GOOD GOVERNANCE
IS AN ESTABLISHED FRAMEWORK OF
COMPANY ATTITUDES AND
PROCESSES THAT ADD VALUE TO THE
BUSINESS AND HELP TO ENSURE ITS
LONG TERM CONTINUATION AND
SUCCESS
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14 PRINCIPLES
• Principles 1 – 8 for all sizes of
organisations
• Principle 9 – for family companies
• Principles 10 – 14 for larger ones
• Build on a step by step basis
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So what is the role of
the Company Secretary
in Good Governance?
• CSP Client Companies
• Small/Entrepreneurial/Family Companies
• Larger trading companies
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Chairman
Executive
Directors
Company
Secretary
NonExec
Directors
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A Company Secretary has Corporate and
Legal Responsibilities.
Being the Company Secretary of a CSP
client company DOES NOT reduce these
The Company Secretary acts as the
conscience of the organisation
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Principle 1:
Framework of responsibilities
Shareholders should establish an
appropriate constitutional and
governance framework for the
company.
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FRAMEWORK
• Knowledge of constitutional framework
• Matters reserved for shareholders
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Approval of accounts
Dividend
Change to Articles
Appointment/Removal of Directors
• Matters delegated to the board
• Beneficiaries are not the controllers of the
company
• Shareholders – power at General Meetings
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Principle 2:
Leadership
Every company should strive to establish an
effective board, which is collectively
responsible for the long-term success of the
company, including the definition of the
corporate strategy.
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LEADERSHIP
• Compliance with all legal and regulatory
requirements
• Authority delegated to you as Secretary
• Strategy
• Policies in existence
– HR
– Health & Safety
– Bribery
– etc
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Principle 3:
Composition of the board
The size and composition of the board
should reflect the scale and complexity of
the company’s activities.
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COMPOSITION OF
THE BOARD
• Register of Directors and Company
Secretaries
• Directorships held
• Skills and experience
• Contact details
• Procedure for appointment
• Period of appointment
• Succession planning
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PRINCIPLE 4:
Decision making
The board should meet sufficiently regularly
to discharge its duties, and be supplied in
a timely manner with appropriate
information.
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DECISION MAKING
• Done at Board Meetings
– Frequency
– Before the meeting
– At the meeting
– After the meeting
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Frequency
• Depends on operation. Needed to
demonstrate management and control of
the organisation
• Location
• Diarise, set for calendar year by about
October, culture of fixed dates
• Diarise review dates for specific actions
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Before the Meeting
• Agenda –
– Include relevant regular/periodic items
– Agree draft with Chairman
– Circulate a draft to other Directors
– Agree final version with Chairman
• Timetable –
– Sufficient time
– Order to give important items relevant
time/priority
– Time limit on any items?
• Quorum
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Board Papers
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Agenda
Minutes of previous meeting(s)
Actions
Papers –
– Timeliness – chase Exec Team
– Quality
– Queries
– Version control/Track changes
• Documents for signature
• Timetable
• Board Packs –asked Directors if suitable?
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At the Meeting
• Quorum present and confirmed
• Register of attendances, highlight to
Chairman any regular non-attendance,
record who is where if some on the phone
• Ensure numbers meet regulatory
requirements.
• Record Director interests
• Ensure previous minutes signed
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Minutes and Actions
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Consistent
Clear criteria and rationale
Clear regarding decision making
Clear actions. If not clear – query through
the Chair.
• Did any Director disagree with decision, do
they want it recorded?
• Would the minutes provide a suitable audit
trail in the event of a challenge?
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After the Meeting
• Circulate draft minutes and actions to
Chairman and then rest of Board asap
• Circulate final version asap not just at next
meeting
• Circulate agreed actions asap and remind
individuals
• Ensure all relevant papers correctly filed
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Actions
• Separate Action list – what, who, when
• Date when action arose (if carried forward)
• If actions not complete quietly remind
person responsible before papers issued
• Include Action list in Board pack with
details of completed or estimated
completion date
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Ensure
• All documentation meets statutory
requirements
• All decisions and actions clearly stated
• Relevant decisions are formally made/
ratified at board/member level
• Relevant documents correctly signed
• Documents distributed to relevant people
• Documents filed logically and timely and
kept for required period
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Principle 5:
Incentives
Levels of remuneration should be sufficient
to attract, retain, and motivate executives
and non-executives of the quality required
to run the company successfully
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INCENTIVES
• Remuneration Policy
• Criteria/Benchmarks
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Principle 6:
Checks and balances
The board is responsible for risk oversight
and should maintain a sound system of
internal control to safeguard shareholders’
investment and the company’s assets
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CHECKS & BALANCES
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Formal rules for signing
Financial Accounts
Internal Controls
Risk Reviews
Register of mortgages and loans
Bank accounts/client funds
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Principle 7:
Shareholder relationships
• There should be a dialogue between the
board and the shareholders based on the
mutual understanding of objectives.
• The board as a whole has responsibility
for ensuring that a satisfactory dialogue
with shareholders takes place.
• The board should not forget that all
shareholders have to be treated equally.
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SHAREHOLDER
RELATIONSHIPS
• Maintain share register
• Report and Accounts to shareholders
• Convene General Meetings
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Calling of meeting and Agenda
Be clear on powers reserved for shareholders
Be clear on structure of shareholdings
Be clear on voting – show of hands or poll
Notify Board of which shareholders will attend and
what you know about them
– Notify Chairman of proxy votes
– Try to anticipate any problems and warn Chairman
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Principle 8:
Reasonable care, skill and
diligence
All directors should receive induction on
joining the board and should regularly
update and refresh their skills and
knowledge
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REASONABLE CARE,
SKILLS & DILIGENCE
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Induction
Training
Register of CPD
D & O Insurance
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Principles for all Companies
1.
2.
3.
4.
5.
6.
7.
8.
Framework of Responsibilities
Leadership
Composition of the Board
Decision Making
Incentives
Checks & Balances
Shareholder Relationships
Reasonable care, skills and diligence
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Principle 9:
Family governance mechanisms
Family-controlled companies should
establish family governance mechanisms
that promote coordination and mutual
understanding amongst family members,
as well as organise the relationships
between family governance and corporate
governance
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FAMILY GOVERNANCE
MECHANISMS
• Depends on situation
• Company is not the personal property of
the owners
• Relates to shares, succession planning,
relationship of family members with board
• Family employment
• Family Governance Body
• Clear distinction between this and
Corporate Governance
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Principle 10:
Accountability / Probity
There should be a clear division of
responsibilities at the head of the company
between the running of the board and the
running of the company’s business. No
one individual should have unfettered
powers of decision.
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ACCOUNTABILITY/
PROBITY
• Delegated responsibilities
• No unfettered powers of decision
making
• Be clear who has the authority to
make decisions
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Principle 11:
Competence
• Board structures vary according to
national regulatory requirements and
business norms.
• However, all boards should contain
directors with a sufficient mix of
competencies and experiences.
• No single person (or small group of
individuals) should dominate the board’s
decision-making.
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COMPETENCE
• Abilities of key people
• Value of NEDs
• Appointment of NEDs
– Research
– Information
– Relationship
– Access to Executive team
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Principle 12:
Board committees
The board should establish appropriate
board committees in order to allow a more
effective discharge of its duties
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COMMITTEES
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Audit/Risk
Remuneration
Nomination
Ad-hoc/Sub-Committees
Others
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COMMITTEES
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Co-ordination
Terms of Reference
Membership
Consistency
Secretarial functions
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PRINCIPLE 13:
Appraisal of board performance
The board should undertake a periodic
appraisal of its own performance and that
of each individual director.
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BOARD PERFORMANCE
• Provision of information
• Your contribution
• Deal with feedback where it affects you
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Principle 14:
Stakeholder engagement
The board should present a balanced and
understandable assessment of the
company’s position and prospects for
external stakeholders, and establish a
suitable programme of stakeholder
engagement.
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STAKEHOLDER
ENGAGEMENT
• Stakeholder communication
• Record Directors’ Interests
• Declaration of interest relating to a
particular transaction
• Bribery Act
• Record of benefits
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Reporting
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Financial
Shareholders
Legal
Regulatory
Statutory
Internally
Other Stakeholders
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Principles
Family
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Family Governance Mechanisms
Large Companies
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14
Accountability/Probity
Competence
Board Committees
Appraisal of Board Performance
Stakeholder Engagement
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Your Contribution
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Be proactive
Understand the organisation and strategy
Ensure all regulatory functions done on time
Aim to provide first class secretarial services to the
Board
Talk to Chairman about support you can give
Talk to Directors about quality of board papers
Talk to NEDs about any support they need
Ensure clear, complete, quality records
Ensure records kept for required length of time
Anticipate!!
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CSPs
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Understand the company and its stakeholders
Understand the strategic plan for the company
Diarise all relevant actions
Talk to Chairman about support you can give
Ensure clear, complete, quality records
Ensure records kept for required length of time
Anticipate!!
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A Company Secretary has duties
to:
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The Board
The Company
The Shareholders
The Regulators
Make sure you know what they are
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Your own style
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Organised
Prepared
Allow sufficient time
Check for errors
Make life as hassle free as possible for the
Chairman and other Directors
• Be one step ahead
• Be professional
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Lord Denning (1971)
The Secretary is an officer of the
company with extensive duties
and responsibilities….
He/she is no longer a mere clerk
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Who would want to be a
Company Secretary??
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IN CARRYING OUT YOUR
DUTIES AS A COMPANY
SECRETARY
There is no expectation of
perfection/ infallibility
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The expectation is that
• you act ‘honestly, competently and
conscientiously’
• have a proper understanding of the role
• take basic protective measures
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You can make a huge
difference to the
effectiveness of a board……
and therefore potentially the
success of the company
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THE CHALLENGE
• For your board to realise you are a star
• And praise you
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IoD Director Training
• 28th September ~ Developing a Growing Business (a 3
day course on Strategy, Finance, Business and the Law)
• 28th September ~ Making your Board more Effective
(evening seminar)
• 4th October ~ Going from Good to Great (evening
seminar)
• 22nd November ~ Roger Barker IoD Head of Corporate
Governance (breakfast)
• 24th November ~ The Director’s Role in Managing
Reputation (1 day course)
• 2012 Q1 ~ Women as Effective Directors (1 day course)
• annclayton@manx.net
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GOOD LUCK
Any questions?
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