3 - Role of the CoSec in governance

Question 1

4 main categories of duties/role of the CoSec

Answer 1

• Governance
• Statutory and regulatory compliance
• Advising the board and senior management
• Communication (being the board’s communicator)

Question 2

6 governance duties set out by ISCA for CoSec

Answer 2

• Board composition and procedures
• Board information, development and relationships
• Accountability
• Remuneration
• Relationship with stakeholders
• Disclosure and reporting

Question 3

CoSec governance duty - Board composition and procedures (3)

Answer 3

• Establishing formal schedule of matters
• Scheduling board meetings, assisting with agendas, board papers
• Ensuring board committees are constituted in compliance with Code, etc.

Question 4

CoSec governance duty - Board information, development, relationships (3)

Answer 4

• Planning and organising director induction programmes, and professional development
• Facilitating flow of good information
• Supporting process of board evaluation

Question 5

CoSec governance duty - Accountability (3)

Answer 5

• Financial and business reporting
• Risk management and internal control
• Audit committee and auditors

Question 6

CoSec governance duty - Remuneration (2)

Answer 6

• Remuneration committee is familiar with Code
• Remuneration of directors does not contravene Code

Question 7

CoSec governance duty - Relationship with shareholders (2)

Answer 7

• Ensuring board keeps in touch with shareholders
• Managing the convening and conduct of the AGM

Question 8

CoSec governance duty - Disclosure and reporting

Answer 8

• Ensuring necessary disclosures are made
• Ensuring requisite types of governance info are made available (ie. on company’s website)

Question 9

Brief summary of CoSec’s role in governance

Answer 9

CoSec role in ensuring that the Board and its committees are constituted properly and that its processes and decision making operate effectively and in accordance with governance principles.

Question 10

Brief summary of CoSec’s role in statutory and regulatory compliance

Answer 10

CoSec has an important role to play in ensuring that the company complies with law and regulation. In particular this covers the requirements of CA 2006, applicable governance code, and reporting requirements.

Question 11

6 statutory and regulatory compliance duties set out by ISCA for CoSec

Answer 11

• Directors’ duties
• Share dealing
• Protection of inside information
• Verification of published information
• Responsible release of market information
• Compliance with continuing obligations under LPDTRs

Question 12

What is LPDTRs?

Answer 12

Listing, Prospectus, Disclosure and Transparency Rules

Question 13

Brief summary of CoSec’s role in advising Board and senioer management

Answer 13

CoSec has important role in advising board and management on a wide range of issues, including engagement with stakeholders, CSR and business ethics

Question 14

Why might the CoSec be referred to as the ‘conscience of the company’?

Answer 14

CoSec often called upon to advise board on what the right thing to do in certain circumstances is to benefit long-term inteests of the company - this is beyond law and ethics and takes the CoSec into the realm of business ethics
CoSec should speak out against bad governance, and unethical or illegal practices

Question 15

Brief summary of CoSec’s role in communication

Answer 15

A CoSec has an important role in ensuring good communication between Board members and between the Board and management

Question 16

4 key areas of skills which should be held by the CoSec

Answer 16

• Communication
• Interpersonal
• Practical
• Commercial and business acumen

Question 17

7 of the interpersonal skills of CoSecs (RICRICS)

Answer 17

• Respectful, diplomatic and effective communication
• Independent mindset
• Confidence and resillience (re. difficult circumstances)
• Relationship management/effective team working
• Integrity
• Calm (in stuations requiring solutions)
• Strength of personality (to demand confidence/trust)

Question 18

Acronym for interpersonal skills of CoSecs

Answer 18

RIC RICS

Question 19

4 ways to ensure commercial awareness of CoSec

Answer 19

• Understand how company makes money and creates value
• Understand what company needs, now and in the future, to continue to make money and create value
• Have a thorough understanding or organisation’s competitive advantage
• Keep up to date with industry

Question 20

Who should the CoSec report to and be accountable to?
What if in dual role?

Answer 20

The Cosec is accountable to the whole board, and should report to the chair (being the leader of the board)
If in dual role, their reporting as a CoSec should be separate to reporting line for other role

Question 21

Importance of CoSec being accountable to, and appointed and removed by, the whole board

Answer 21

Prevents a single director from gaining power of being in charge of CoSec - increased power can come from control over continuing employment, remuneration can cause CoSec to be favourable to controlling director

Question 22

4 primary challenges to independence of a CoSec

Answer 22

• Reporting lines - should be responsible and accountable to the whole Board
• Appointment and Removal - should be appointed and dismissed by the board as a whole
• Remuneration - should be decided by the board or remuneration committee
• Evaluation - should be carried out as part of annual board evaluation

Question 23

What is the most common position held by ‘dual role’ CoSecs in FTSE companies

Answer 23

General counsel / head of legal

Question 24

2 disadvantages of a CoSec acting in a dual role

Answer 24

Challenge to independence as they have another role to fulfil and have to answer to board re. this role. This may lead them to only strictly comply with law while ignoring reputational impact and morality.

Role as an independent advisor to the board could be compromised if they report to an exec in relation to their role as CoSec

Question 25

What should position of CoSec within org be?

Answer 25

Position of seniority to allow better understanding and more respect within org

Question 26

Will a CoSec typically be held liable for their own actions?

Answer 26

No, but it has happened, such as with Hillsborough

Question 27

What will a CoSec be liable for?

Answer 27

Default fines and other penalties for officers, with the directors

Question 28

3 reasons to outsource CoSec

Answer 28

• Ensure all requirements are met by specialised firm
• Reduce costs, especially in start-ups
• Fulfil requirement to file company documents online

Question 29

7 reasons not to outsource CoSec

Answer 29

• In-house CoSec will have greater knowledge and understanding of firm, and relationships with board and management
• Available at all times
• Able to take on other responsibilities
• Provide support that external firms may struggle or be unable to provide
• ‘Conscience of company’ role cannot be fulfilled
• Greater confidence in confidentiality
• If outsourced, directors still maintain responsibilities and therefore have to monitor outsourced CoSec

Question 30

Who cannot be appointed as the cosec?

Answer 30

The auditor or any employee of the auditor

Question 31

4 categories or persons automatically deemed to have relevant quali to be a cosec

Answer 31

• Barrister, advocate or solicitor
• Member of CGI or an institute of chartered accountants
• Person who by being member of other body appears capable of discharging functions of a cosec
• Person who held office of cosec for public company for at least 3 or previous 5 years

Question 32

7 areas where board should advise board

Answer 32

• Good board practices
• Transparency and disclosure
• Effective control environment
• Relationship with shareholders and - stakeholders
• Corporate responsibility
• Conducting businesses ethically
• Board’s commitment to CG

Question 33

5 elements of cosec’s role in communication

Answer 33

• Communicating board’s decisions to management team
• Managing disclosure of board’s decisions to regulators and stakeholders
• Facilitating good flow of information
• Being primary point of contact between non-execs and company
• Ensuring relevant disclosures made