The company secretary is responsible, under UK law, to advise the chairman on corporate governance. At the largest UK private companies, reporting on compliance with corporate governance will become mandatory as of January 2019. This means that the company secretary must drive compliance with the UK Corporate Governance Code, and must also work closely with the chairman to ensure that reporting is detailed, complete and accurate.
New Corporate Governance Imperative at Private UK Companies
The company secretary is responsible, under UK law, to advise the chairman on corporate governance – it’s a partnership where compliance is concerned, even though the chairman stands on a much higher rung of the corporate hierarchy, as the UK Institute of Directors explains in a note.
This role has recently become critical. The largest private companies in the UK — UK-incorporated private companies that either: (a) have more than 2,000 employees globally; or (b) have both turnover of more than £200 million and total assets of more than £2 billion globally — will need to publish a statement (in the annual report and on the website) starting in January 2019, explaining:
- Which corporate governance code, if any, the company applied;
- If the company applied a corporate governance code, how the company applied or departed from that code (together with the reasons for any such departure); and
- If the company did not apply a corporate governance code, the reasons for that decision and an explanation of the corporate governance arrangements that it applied (summary from London office of Cleary, Gottlieb, Steen & Hamilton).
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Company Secretary Must Support Chairman for Corporate Governance
Some of the requirements for reporting on corporate governance are challenging, and the chairman will indeed need to partner with the company secretary to fulfil them.
The reporting must show that the board is helping to create value, and that it is making a difference in the company’s success. It must be clear that the board is guiding the organisation in its effort to achieve its goals. The board is also responsible for building a healthy corporate culture.
Clearly, providing a detailed account that shows these processes are taking place is not easy. The company secretary should plan several sessions alone with the chairman to create an overview of these processes, and then, if necessary, sh0uld meet with other directors as well as with management.
The chairman should be able to provide good guidance on how the board is performing, and on the contributions of individual directors (which must also be reported on). The company secretary can then approach the rest of the board and request individual director evaluations.
Putting all that information together into a report for publication isn’t easy, though. The company secretary should draft a version of the report, and then go over it carefully with the chairman.
Board composition is another challenging area on which to report. Is the board a good mix? Does it take the initiative in moving the organisation ahead? Is there enough variance in points of view? Are there board members who have expertise in key areas like risk management or cybersecurity?
The chairman will have a well-developed view of all this, but often, that director sees only the positive side of boardroom dynamics, being so much at the centre of it all. The company secretary may have to debate some of the content of the report on board composition with the chairman to arrive at a fair assessment.
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The chairman and the company secretary must also work as a team in managing engagement by the board with all stakeholders, from employees to shareholders. Again, a detailed description of these processes must be made as part of the new corporate governance requirements. Are shareholders being informed regularly of key developments? Is the voice of the employees being heard in the boardroom? The company secretary should question the chairman closely about these issues and should encourage the chairman to admit where engagement has not been successful.
Determining director independence is also the responsibility of the chairman and the company secretary together: They must make certain that all directors are free of conflicts of interest. This is particularly important for non-executive directors, whose role is to review the strategy and the actions of the board.
While non-executive directors should provide the board with sufficient information to allow them to evaluate their independence and are responsible for notifying the board should conflicts arise, a careful review of this must be part of corporate governance reporting.
Preparing all this reporting means gathering a great deal of sensitive information, and the company secretary should have a high-quality board portal to support data collection, as well as to make sure all information is safe from hackers.
Diligent’s Governance Cloud Supports Good Governance
Company secretaries seeking to practice good corporate governance for the first time should rely on the Diligent Governance Cloud.
Diligent designed the Governance Cloud with the processes of board directors, executives, general counsels and corporate secretaries in mind. No other company offers such a comprehensive array of software tools that are cohesive and connected to fully meet the needs of today’s board directors.
The few governance solutions that are in the market today have largely been fragmented and disconnected from other processes. Board directors, general counsels and company secretaries are realising the need for governance solutions that help them manage governance activities effectively and efficiently. Boards need products to help them streamline duties for compliance, regulation and governance while keeping all processes in a highly secure, confidential platform.
The Governance Cloud, the only integrated enterprise governance management solution that enables organisations to achieve best-in-class governance, is an ecosystem of software tools that digitises the various activities and tasks for the board of directors. As organisations grow more complex and regulations more stringent, the scope of governance responsibilities evolves. The Governance Cloud allows boards of directors to meet the demands in the boardroom and beyond with the ability to select the products they need that help them perform their best and work within their allotted budgets.
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