Part One, Chapter 3 - Role of The Company Secretary In Governance Flashcards
These flashcards cover the content in chapter 3 of the textbook (pages 38 - 54). (43 cards)
What did the Cadbury Report state was the role of the company secretary?
The Cadbury Report stated that ‘the company secretary has a key role to play in ensuring that board procedures are both followed and regularly reviewed’.
What do the ICSA redefine the company secretary as?
The ICSA states ‘the company secretary is a strategic position of considerable influence at the heart of governance operations within an organisation.’
What type of qualities should the company secretary have?
Thee company secretary should be a confidante and adviser to the chair and other members of the board. They should also be a conduit for information flows and often a mediator or arbitrator between the board, management, shareholders and other stakeholders.
What does Section 271 of the CA2006 state?
That all public companies in the UK must have a company secretary.
Do private limited companies need to appoint a company secretary?
No, unless there is an express requirement in the company’s articles of association.
Why do companies continue to employ company secretaries?
In the absence of a company secretary, s. 270 of the CA2006 states that directors must take on this responsibility. This is why many private companies continue to employ a company secretary in order to reduce the administrative and corporate governance burdens which that would otherwise be placed on their directors.
What does The Wates Principles for large private companies suggests in its guidance (in relation to the company secretary)?
The Wates Principles suggests that the chair and the company secretary should ‘periodically review the governance processes to confirm that they remain fi t for purpose and consider any initiatives which could strengthen the governance of the company’.
What does provision 16 of The UK Corporate Governance Code 2018 state?
Provision 16 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 a matter for the whole board.’
Which types of companies do provision 16 of The UK Corporate Governance Code 2018 apply to?
Companies with a premium listing.
The duties of the company secretary can be broken down into four main categories. List them.
- Governance
- Statutory and regulatory compliance
- Advising the board and senior management
- Being the board’s communicator
According to ICSA’s guidance, what are the duties and responsibilities of the company secretary for governance? Provide two examples relating to board composition and procedures.
- Establishing a formal schedule of matters reserved for decision by the board and a formal division of responsibilities between the chair and CEO or other layers of management.
- Scheduling board meetings, assisting with the preparation of agendas, providing guidance on board paper content, ensuring good and recording board decisions clearly and accurately, pursuing follow-up actions.
- Ensuring that appropriate insurance cover is arranged in respect of any potential legal action against directors.
- Ensuring board committees have the appropriate balance of skills, experience, independence and knowledge of the company.
- Supporting the board on board succession planning and on the process for the appointment of new directors to the board.
According to ICSA’s guidance, what are the duties and responsibilities of the company secretary for governance? Provide two examples relating to board information, development and relationships.
- Planning and organising director induction programmes which provide a full, formal and tailored introduction to the
board and the business. - Planning and organising director professional development programmes to refresh the directors’ skills and
knowledge. - Arranging for major shareholders to be offered the opportunity to meet new directors.
- Facilitating good information flows between board members, the committees and senior management as well as and fostering effective working between executive and non-executive directors.
- Establishing and communicating procedures for directors to take independent professional advice at the company’s
expense if required.
According to ICSA’s guidance, what are the duties and responsibilities of the company secretary for governance? Provide two examples relating to accountability.
- Having a detailed knowledge of the board’s responsibility to present a fair, balanced and understandable assessment of the company’s position and prospects in annual and reports.
- Assisting the board in an annual review of the effectiveness of the company’s risk management and internal control systems including financial, operational and compliance controls.
- Ensuring that the audit committee is fully conversant with the 2018 Code principles around corporate reporting, risk management and internal control principles. This should include the relationship with the external auditors.
- Ensuring the implementation and monitoring the effectiveness of the procedure for staff to raise concerns about possible improprieties in matters of financial reporting or other matters.
According to ICSA’s guidance, what are the duties and responsibilities of the company secretary for governance? Provide two examples relating to remuneration.
- Ensuring that the remuneration committee is familiar with the 2018 Code principles and provisions on remuneration.
- Ensuring that grants of share options and other long-term incentive awards do not contravene the 2018 Code.
- Ensuring that the provisions in the directors’ term of appointment in relation to early termination are in accordance with the 2018 Code.
- Ensuring that non-executive remuneration is determined in line with Code provisions and within the limits set by the
articles of association. - Ensuring that all new long-term incentive schemes and significant changes to existing schemes are submitted to
shareholders for approval, in accordance with the Listing Rules. - Ensuring compliance with the legal requirements in relation to directors’ remuneration, including any necessary
shareholder approvals, contributing to the drafting of the directors’ remuneration report and ensuring its compliance
with disclosure requirements.
According to ICSA’s guidance, what are the duties and responsibilities of the company secretary for governance? Provide two examples relating to the relationship with shareholders.
- Ensuring the board keeps in touch with shareholder opinion on a continuing basis.
- Managing relations with institutional investors on corporate governance issues and board procedures in accordance with the principles established in the UK Stewardship Code.
- Managing the convening and conduct of the AGM in line with statutory and regulatory requirements and the 2018
Code and using it as an opportunity to communicate with retail investors.
According to ICSA’s guidance, what are the duties and responsibilities of the company secretary for governance? Provide two examples relating to 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 requisite types of governance information are made available, as required, for example on the company’s website.
What other duties are managed or shared by the company secretary?
- Directors’ duties
- Share dealing
- Protection of inside information
- Verification of inside information
- Responsible release of market information
- Compliance with continuing obligations under the LPDTRs
How can a company secretary provide good board practices?
By:
- Clearly defining board roles and authorities.
- Advising directors of their duties.
- Providing a well structured board with appropriate skills.
- Providing an annual board evaluation of the whole board.
- Providing board papers to include information relating to stakeholder impact.
Company secretaries should be able to evidence transparency and disclosure processes are in place to the board of directors. Provide two examples of transparency and disclosure processes.
- A formal and transparent procurement policy and procedure should be in place. This should be reflected in a
procurement manual. - A formal and transparent recruitment policy and procedure should be in place. This should be reflected in the human resources policies and procedures of the organisation.
- A process 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 the positive
and negative. This should be considered at the board meetings and included in the minutes of the board meeting such reports.
Company secretaries should be able to evidence effective control environments are in place to the board of directors. Provide two examples of effective control environments.
- An audit committee comprising of independent members with the appropriate skills and experience.
- The risk management and internal controls systems should be assessed for their adequacy annually by the internal
auditors. Assurance of adequacy should be included in the board meeting minutes which then forms part of the ‘statement of directors responsibilities’ in the accounts. - An internal audit function.
- If an internal audit function does not exist within the organisation, consideration by the board on an annual basis
as to whether there should be one established. Evidence of consideration of whether to establish an internal audit
function should be in the minutes of the audit committee and board meetings. - Appointment of an independent external auditor. This is evidenced by agenda items and minutes of meetings
discussing the independence of the external auditor, policies prohibiting non-audit work by the company’s external
auditors and auditor rotation.
Company secretaries should be able to evidence relationships with shareholders and stakeholders are in place to the board of directors. Provide four examples of how secretaries can evidence this.
- Through well-run annual general meetings.
- By recording face-to-face meetings with major shareholders.
- By adopting electronic means of communications with shareholders.
- Agenda items and minutes.
Company secretaries should be able to evidence corporate responsibility to the board of directors. Provide three examples of how secretaries can evidence this.
Secretaries can evidence corporate responsibility by:
- Showing the board considers the social and environmental impact of its activities and decision making in agenda items and minutes of board meetings.
- Promoting the long-term view in long-term performance incentives for senior executives, as well as the development of a business continuity plan setting out how the organisation intends to stay in business in the long-term.
- Carrying out activities responsibly and evidencing of this is the establishment of win–win partnerships that benefit both
the organisation and the society.
Company secretaries should be able to evidence ethical business practices to the board of directors. Provide three examples of how secretaries can evidence this.
Secretaries can evidence ethical business practices by:
- Developing an ethical culture based on shared values and evidencing this around the organisation’s premises and the company’s website.
- Developing a code of ethics based on the values developed and ensure the codes are being followed.
- By rewarding ethical conduct through remuneration practices of the company.
Company secretaries should be able to evidence commitment to following corporate governance to the board of directors. Provide three examples of how secretaries can evidence this.
Secretaries can evidence they are following corporate governance by:
- Ensuring that the board discusses corporate governance issues on a regular basis. This can be evidenced by agenda items and minutes of board meetings.
- Developing a corporate governance improvement plan. This usually comes from the board evaluation process. Evidence would be the plan being discussed at board meetings.
- Promoting the company as a corporate governance leader with best-in-class corporate governance reporting.
