The role of company secretary in governance Flashcards
What is the role of the company secretary in governance? and the skills that it requires?
The role of a company secretary plays a vital role in governance and compliance, advisor and communicator to the board and senior management.
The skills that they require is strong interpersonal skills and commercial and business acumen.
Independence of a company secretary is essential to good governance and steps that can be taken to preserve independence of the company secretary.
The company secretary needs to be a confident and adviser to the chair and members of the board.
They should also conduct information flows and be a mediator or arbitrator between the board, management, shareholders, and stakeholders.
the requirements for a company secretary?
Companies Act 2006 section 271 states that all public companies in the UK must have a company secretary.
No requirement for a private company to have one.
Why do private companies still have a company secretary although there is no requirement to have one?
The work and duties of a company secretary must still be done. Therefore s270 Companies act 2006 states that directors must take on this responsibility.
This way must private companies continue to employ a company secretary in order to reduce the administrative and corporate burdens which would otherwise be placed on their directors.
UK Corporate Governance Coe 2018
Provision 16 of the code, which applies to companies with a premium listing states:
‘all directors should have access to the advice of the company secretary, who is responsible for advising the board on all governance matters. Both the appointment and removal of the company secretary should be matter for the whole board’.
What is the role of the Company Secretary?
The main role of the company secretary:
- Governance
- Statutory and regulatory compliance
- Advising the board and senior management
- Being the board’s communicator
ICSA’s guidance note ; the corporate governance role of the company secretary’ are…?
ICSA set out the following specific duties and responsibilities of the company secretary for governance:
- Governance
- Board composition and procedures, Board information, development and relationships,
- Accountability (risk mgt and internal control, audit committee & auditors),
- Remuneration - remuneration committee is familiar with the code principles and provisions, including designing remuneration packages),
- Relationship with shareholders - (Ensuring the board keeps in touch with shareholder opinion on a continuing basis, Managing relations with institutional investors, - Disclosure and reporting - Ensuring that the necessary disclosures on corporate governance and the workings of the board and its committees are included in the annual report & Ensuring that the necessary types of the governance info are made available as required for example on the company’s website.
- Statutory and regulatory compliance
- Directors’ duties
- Share dealing
- Protection of inside information
- Verification of published information
Advising the board and senior management on Good board practices (Clearly defined roles, Directors to understand their duties and responsibilities, Board to be well structured and have the appropriate composition and skills, Directors’ remuneration should be in line with best practice).
- Transparency and disclosure
Company secretary should advise on A: formal and transparent procurement policy and procedures should be in place – Procurement manual, A formal and transparent recruitment policy and procedures should be in place – HR manual, A process is put in place to ensure that all statutory and regulatory disclosures are reviewed by the board, Information disclosed by the company, both financial and non-financial should be balanced between positives and negatives
- Relationships with shareholders and stakeholders
(Both can be evidenced through either a well run annual general meeting, agendas, records of face-to-face meetings with major shareholders ad stakeholders and the adoption of electronic communications) - Conducting businesses ethically - (Ethical culture should be developed based on shared values and evidenced by the board approving a set of values that have been generated by employees. These should be displaced around the organisation’s premises and website.
- Code of ethnics based on the values developed. Integration of the 2018 code into the company’s business practices and evidenced by the lack of breaches the 2018 code. Any breaches should be raised and considered at the audit committee
- Ethical conduct rewarded through the remuneration practices of the company – practices should be audited to ensure that they are effective in reducing unethical behaviours.
Why is the company secretary often referred to as a bridge for information, communications advice, and arbitration?
The company secretary is referred to the as bridge for information, communication advice and arbitration because they play an important role as the board’s communicator. This will differ from company to company.
However, best practice is that the company secretary should be the person responsible for:
- Communicating all board decisions to the relevant members of the management team.
- Managing the disclosure of the board’s decisions to regulators and other stakeholders. This is because they understand the requirements as far as content to be disclosed and the importance of timely and balanced disclosures.
- Liaising between the board members and senior management on logistics for board and board committee meetings, training sessions, board retreats, board evaluation sessions and other board events.
- Facilitating good information flows between the board, individual board members, the committees and senior management that foster effective working relationships between them.
- Being the primary point of contact between the non executives and the company, as a source of information and advice. Without this, management could be distracted by requests from non-executive directors, some of which may be for the same information.
What are the Key challenges faced by company secretaries?
The key challenges faced by company secretaries are:
- Being considered traitors by the executive team
- Supporting chair exhibiting poor performance
- Acting as the 3rd person in a CEO - chair relationship
- Becoming a pivotal contact for unsurmountable problems
- Maintaining independence from other executives and board members
To overcome these challenges company secretaries, in addition to their technical skills, needed commercial and business acumen and interpersonal skills, which may be considered most important.
The Interpersonal skills that the company secretary requires?
The interpersonal skills that a company secretary requires are:
- Empathy and relationship management
- Active listening
- Bringing issues to the surface, especially those relating to reputational risk
- Respecting confidences
- Independent mindset
- Effective team working
- Being able to summarise common concerns and interests
- Disagreeing constructively
What are the practical skills that a company secretary requires?
Practical skills that a company secretary requires to manage relationships and tensions are as follow:
- Listen actively: demonstrate attention and interest by nodding or using facial expressions.
- Establish Report: encourage speakers to reveal their concerns of interest: Use open ended questions that begin with words like: who, what, why and how.
- Be aware of body language: watch out for signs of tension
- Focus on constructive ideas: Build on and contribute constructive alternatives. Avoiding using the work ‘but’ too often
- Stay Calm: be polite and avoid using heightened language or tone of voice that adds to the or provokes anger.
- Know when to close a confrontational exchange: ‘I suggest that we continue this discussion later’.
- Suggest steps to resolve solutions
Why does a company secretary have to have Commercial and business acumen skills?
A company secretary must have commercial and business acumen skills.
Governance is more than compliance; it is how an organisation structures itself to perform effectively and efficiently in the long term.
To be more commercially aware, an individual must understand the business they are in and make good practical decisions as a result.
As a company secretary you must be able to advise the board on this basis so that they make the decisions.
To be commercially aware you must make sure:
- You understand how your company makes money and creates value
- You must understand what your company needs, now in in the future, so that it continues to make money and create value
- You must have a thorough understanding of your organisation’s competitive advantage
- You should keep up to date with your industry
Why is it important for company secretary to have interpersonal skills and commercial and business acumen?
Many company secretaries face the following key challenges:
- Being considered as traitors by the executive team
- Supporting chairs exhibiting poor performance
- Being the 3rd person in a CEO-Chair relationship
- Becoming a pivotal contact for overwhelming problems and
- Maintaining independence from other executives and board members
To overcome these challenges company secretaries, in addition to their technical skills, need commercial and business acumen and interpersonal skills which many consider to be most important.
In 2012 a study by the All Party parliamentary Corporate Governance Group criticised many company secretaries for not being ‘commercially minded’ or aware.
They saw this a being an important feature of the job especially as they advise on board and governance issues.
To be commercially aware individuals must understand the business they are in, and make good practical decisions as a result.
In the case of the company secretary, this means being able to advise the board on the basis so they can make the decisions.
‘ The company secretary: Building trust through governance’ highlighted the importance that the majority of company secretaries acknowledged that
‘commercial awareness and abilities are critical to ensuring their understanding of what is right for the organisational, what information means and to whom relevant questions need to be passed’.
Why does a company secretary’s position need to be seniority?
In order for the company secretary to carry out their duties and responsibilities effectively, they need to hold a position of seniority within the organisation.
It is debated whether they should be a member of the executive team. Some think this compromises their independence. Whether or not they are a member of the executive team, they should attend meetings of the executive team.
This will enable them to advise the executives on governance issues arising out of any proposals as they are being formulated.
They can also advise on how the board might react to a particular proposal ad what questions the executive should be prepared to answer when the proposal is considered by the board.
Attending executive meetings also helps the company secretary get an understanding of the executives positioning and reasons for suggesting the proposal which may help the company secretary if the proposal needs to be ‘sold’ to the chair.
Remember that the company secretary can often fill the role of the mediator or arbitrator between the CEO and the Chair.
How can an organisation maintain the independence of the company secretary?
‘Appointment of the company secretary states that: ‘boards have a right to expect the company secretary to give independent, impartial advice and support to all the directors. Both individually and collectively as a board’
It is for this reason that best practice is that company secretaries should be appointed and dismissed by the board as a whole’.
Liability of the company secretary ?
As an office of the company, the company secretary may be liable, with the directors, to default fines and other penalties for offers under the companies Act 2006.
A company secretary can under s 1157 CA 2006 apply to the court for relief in respect of any liability. The secretary will not normally be held liable with directors for any breach of trust or malfeasance committed by the team.
Reasons to outsourced company secretary
Reasons to outsource a company secretary:
- To ensure that all of the statutory and regulatory requirements are met by a specialised firm.
- To reduce costs of employing a person with a specific qualification, especially in a start up company.
- To fulfil a requirement that filings be carried out by a professional firm.
