Transcript PPT - Co-operatives UK

Key themes and trends in UK governance
Julia Casson, Director, Board Insight Limited
My agenda today
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What is governance and how can it support our work?
New issues in 2010 UK corporate governance code
Key points from FRC board effectiveness guidance
Would it be useful to reflect any of these developments in the Cooperatives UK Code?
How can governance support our work?
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What do we mean by governance?
UK Code – the way organisations are ‘directed and controlled’
The board’s work on strategy, controls, values and standards
Key issues – accountability, transparency, ethics, avoiding conflict
of interest, avoiding concentration of power in too few hands......
Approach must be proportionate to size and scope of organisation
Better ways of working save time and avoid loss
Board Insight –
• Practical ways to ensure proper stewardship of the organisation
to promote good performance’
The new UK corporate governance code
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Key themes
• Emphasis on the leadership role of the Chair
• The board must take responsibility for risk
• Board composition and diversity
• Role of directors
• External board evaluation at least every 3 years for largest
companies
See FRC website at www.frc.org.uk/corporate/ukcgcode.cfm
Leadership and effectiveness
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New sections in code on leadership and effectiveness
Code asks chair to comment in annual report on how leadership
and effectiveness aspects of the code have been addressed
Chair responsible for the leadership and effectiveness of the board
And for ensuring adequate time is available (at board meetings) for
discussion of all agenda items, in particular strategic issues
Chair should promote a culture of openness and debate
By facilitating the effective contribution of NEDs in particular and
ensuring constructive relations between executive and NEDs
Chair should regularly review and agree with each director their
training and development needs
Risk
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More emphasis in UK code on the board’s role in risk
Board is responsible for determining the nature and extent of the
significant risks it is willing to take in achieving its strategic
objectives
Board should maintain sound risk management and internal control
systems
Risk
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In practice:
• Periodic board discussion and agreement of risk approach
• Test proposals against agreed approach
• Better oversight of controls (not just the audit committee!)
• Risk assessment in all board and committee papers and MI
• Link risk to strategy and remuneration
• Embed risk management throughout the organisation
• Create risk aware culture
Board composition
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The search for board candidates should be conducted and
appointments made on merit against objective criteria
And ‘with due regard to the benefits of diversity to the board,
including gender’
The aim is a balanced board, regularly refreshed
Directors of FTSE 350 companies should be re-elected annually
Board diversity
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Diversity – the code to be amended from October 2012
• Companies to have a diversity policy and report annually on it
“A separate section of the annual report should describe the work of the
nomination committee, including the process it has used in relation to board
appointments. This section should include a description of the board’s
policy on diversity, including gender, any measurable objectives that it
has set for implementing the policy, and progress on achieving the
objectives. An explanation should be given if neither an external search
consultancy nor open advertising has been used in the appointment of a
chairman or a non‐executive director.”
Changed wording in bold
Board diversity
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New wording in UK code from October 2012
• “Evaluation of the board should consider the balance of skills,
experience, independence and knowledge of the company on
the board, its diversity, including gender, how the board
works together as a unit, and other factors relevant to its
effectiveness”.
New wording in bold
Directors
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NEDs should ‘constructively challenge’ and help develop proposals
on strategy
Directors should allocate sufficient time to discharge their
responsibilities effectively
All directors should have appropriate knowledge of the company
and access to its operations and staff
Board evaluation
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Code has provided for annual board evaluation since 2003
This is also in the Co-operatives UK Code
The change – largest companies to have external evaluation at
least every 3 years
Why?
• Greater credibility
• Objectivity
• Independence
Proportionality is key
How to choose your approach
FRC guidance on board effectiveness
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Non-mandatory guidance to assist in applying the leadership and
effectiveness aspects of the code
See http://www.frc.org.uk/publications/pub2526.html
Sets out main elements of roles of certain board members
Includes a section on the company secretary
Long section on decision-making - process and cultural issues
Eg include in board papers a description of the process used to
arrive at the proposal
How to optimise decision making and avoid factors which inhibit it
FRC guidance – the company secretary
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Cosec to play ‘a leading role in the good governance of the
company by supporting the chairman and helping the board and its
committees to function efficiently’
‘The company secretary should report to the chairman on all board
governance matters’
‘The chairman and the company secretary should periodically
review whether the board and the company’s other governance
processes, for example board and committee evaluation, are fit for
purpose, and consider any improvements or initiatives that could
strengthen the governance of the company’
FRC guidance – the company secretary
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‘The company secretary should ensure the presentation of
high‐quality information to the board and its committees’
‘The company secretary can also add value by fulfilling, or procuring
the fulfilment of, other requirements of the Code on behalf of the
chairman, in particular director induction and development’
‘The company secretary’s effectiveness can be enhanced by his or
her ability to build relationships of mutual trust with the chairman,
the senior independent director and the non‐executive directors,
while maintaining the confidence of executive director colleagues’
Questions and discussion