As of January 2019, the largest private companies in the UK must report on compliance with established corporate governance. Here are five steps company secretaries may take to engage in the process for which they will be responsible.
Company Secretary must drive corporate governance compliance
The company secretaries role means doing a tough, complicated job. Now, at UK private companies, the role of the company secretary just became much more complicated, as corporate governance rules will apply to the largest of them for the first time.
At most organisations, it is the company secretary who oversees compliance for the board. As Deloitte puts it in an article:
“The Board, particularly the chairman, relies on the company secretary to advise them not only on directors’ statutory duties under the law, disclosure obligations and listing rule requirements, but also in respect of corporate governance requirements and practices and effective board processes.”
Now that role has become even more critical at the largest private companies in the UK; as of January 2019, these organisations must begin to report on corporate governance implementation under the so-called ‘apply or explain’ principle – meaning that they must extensively explain either their compliance or why they did not comply.
The new governance reporting requirement will apply to UK-incorporated public and 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. Large UK subsidiaries of foreign-listed companies will become subject to the new governance reporting requirement.
5 steps private company secretaries should take to drive compliance
Here are five steps that company secretaries should take in order to drive compliance. In each of these, the support of a high-quality board portal can be invaluable.
1. Review board composition
The company secretary should work with the chairman to review the makeup of the board. The new Wates Principles for private companies emphasise the importance of diversity and a useful mix of skills and backgrounds among directors.
But most private companies in the UK do not evidence diversity and skills complementarity on their boards. Private companies in the UK, even the largest ones, tend to be dominated by owners and family members. They are, of course, not required by law to diversify their boards, but then they must show in detail why they do not choose to do so. The company secretary can help to make the necessary changes and advise on corporate governance rules. Using a high-quality board portal, the company secretary can consult on corporate governance issues and details of compliance which are part of the portal’s library of materials.
2. Evaluate board performance
The Wates Principles emphasise board effectiveness, calling for directors to make a valuable contribution and to ensure effective decision-making.
The company secretary is usually already in charge of board evaluations, but should immediately step up the process so that board effectiveness is well-documented, and so that any gaps in performance may be addressed.
A high-quality board portal includes an evaluations module that helps your organisation to address these issues by putting valuable board self-assessment data forward. Using such a module is far more convenient than struggling with the spreadsheets that are generally employed for this purpose. And it is far less expensive than working with third-party consultants.
Learn the ‘8 steps to building a best practice board evaluation environment’ with this free white paper.
3. Review the board’s risk management
The Wates Principles call for the board to “promote the long-term success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.”
While risk management should be a routine part of the board’s agenda, it is often haphazard at private companies where board members may be shareholders driven by the single priority of improving profit.
The company secretary should seek to normalise and professionalise risk management, making use of third-party experts when necessary. The board will be obliged to report on its choices in this critical area in detail, so the company secretary should set the procedures in motion by working with a high-quality board portal which has guidance for risk management and which makes communication with experts secure.
4. Review board and management remuneration
To comply with the Wates Principles, the company secretary should initiate a review of director and management remuneration. This involves using a number of statistical approaches, all of which can be accessed through the high-quality board portal. Communication with shareholders, who are sensitive to this issue, should also be managed through the portal.
5. Review engagement with employees
Under the Wates Principles, the board has a responsibility to oversee meaningful engagement with material stakeholders, including the workforce, and have regard to that discussion when taking decisions.
Few private companies engage meaningfully with workers. To begin efforts to make this happen, the company secretary should initiate communication with the workers’ representatives, and should compile a record of worker input via the board portal. The portal is ideal for managing secure communications, and for storing them safely where access to them can be limited to those who have a right to it.
Diligent Governance Cloud supports good governance
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 corporate 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 and company secretaries 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.
WANT TO LEARN MORE?
Learn how your board can improve their governance and rely on Diligent’s dedication to customer performance. Request a demo today
Board Portal Buyer’s Guide
With the right Board Portal software, a board can improve corporate governance and efficiency while collaborating in a secure environment. With lots of board portal vendors to choose from, the whitepaper contains the most important questions to ask during your search, divided into five essential categories.
December 28, 2020
What Role Does the Board Play in Business Continuity Planning?
Continuing in the face of adversity has been the dominant theme of the past year. When the scale of disruption caused by COVID-19 became clear, businesses worldwide were forced to adapt rapidly to the restrictions that came into force overnight. While many organisations have business continuity plans designed to keep…
December 21, 2020
Business Continuity Plan Maintenance: A Step-by-Step Guide
A business continuity plan (BCP) is a living, evolving document. Designed to be activated when unplanned disruption strikes, it must be flexible enough to guide actions regardless of the specifics of the situation. In a fast-changing environment, business continuity plan maintenance is an essential part of the business continuity programme…
December 8, 2020
Board Meeting Minutes Best Practices and Guidelines
Guidelines for Board Meeting Minute Taking In order to keep the courtroom from invading the boardroom, the most basic rule is, “saying less is often better,” warns the London-based law firm Bricker & Eckler in a recent note. “Today’s business climate places heightened…