icsa isle of man conference 2016
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The ICSA Isle of Man Conference 2016
ICSA 125: The Governance InstituteSimon Osborne FCIS, Chief Executive, ICSA
125 years of leading governance
ICSA125This October we celebrate 125 years since the institute first was first formed.
• 1891: the Institute of Secretaries
• 1971: the Institute of Chartered Secretaries and Administrators
• 2016: ICSA: The Governance Institute
125 years of leading governance• Positioning ourselves for the future
• ICSA: The Governance Institute
• Royal Charter to lead ‘effective governance and efficient administration of commerce, industry and public affairs’
125 years of leading governanceWhere we’re heading:
• ICSA to be the provider of products and services to support the skills and knowledge of professionals working in governance and legal and regulatory compliance roles in organisations of all types and sizes and in any sector
• A wider set of products and services, particularly qualifications, for people outside of the corporate market
• Revision of qualifications to keep them current and in demand
• Higher public profile in the media
125 years of leading governance
How we’re getting there:
• Continued focus on raising our public profile
• Increased public profile courtesy of the Policy team, ie Code of Governance for CCGs, blogs, technical briefings, articles, speaking at events and responding to consultations
• Positioning ICSA as a thought leader in national and regional media
• Governance and Compliance magazine
• Research projects
• www.icsa.org.uk
125 years of leading governanceEncouraging the future faces of governance:
• One to Watch, ICSA Awards
• Tom Morrison Essay Prize
125 years of leading governanceGovernance professionals are right at the heart of things, promoting accountability, transparency, integrity and stewardship to ensure that organisations operate in a manner which is most productive.
‘Governance focus has increased, the company secretary’s role has increased, [there is] more work to do, and that work is more visible.’ (The Company Secretary: Building trust through governance, Henley Business School)
The study, development and practice of governance are here to stay.
ICSA: The Governance Institute has a bright future ahead of it!
Regulatory UpdateRox a n n e O l d h a m – D i re c t o r
Po l i c y , Le g a l a n d A u t h o r i s a t i o n s
1 1 M a y 2 0 1 6
Creat ing one organisat ion – the
beginning• IOMFSA created wef 1 November 2015 - simultaneous dissolution of FSC and IPA
• Legally complete at that time – functions transferred etc.
• New CEO – Ms Karen Badgerow
• New Board – some from each of ex-FSC/IPA, some entirely new
Creat ing one organisat ion – current
state• CEO meetings – engagement with industry, all staff and other stakeholders
• One team internally – sharing of knowledge, best practices, resources, expertise
• Key priorities established – some reprioritisation / some new priorities
• Getting on with business – ICP project, crowdfunding, alternative banking, secondary legislation update
Creat ing one organisat ion – future state
• Considering how we regulate – supervisory style – collaboration with stakeholders, implications and impacts of regulatory requirements, principles vs rules
• Considering what we regulate – embrace innovation, focus on the risks, whilst remembering equivalence is needed for market access
• Programme review – • Purpose, vision and values• Process review (core activities / streamlining / IT
system)• Review of delegated authorities - “the right decisions,
at the right level” • Alignment of legal and regulatory frameworks• Operational review (HR, infrastructure)
Recent in i t iat ives – crowdfunding
p lat forms• Legislation - came into effect 1 May 2016• New class of regulated activity under FSA08
– Class 6• Loan based crowdfunding – bringing together
lenders and borrowers through an online platform• Investment based crowdfunding - bringing
together investors and issuers of equity through an online platform
• Balance of two important objectives – innovation in finance and importance of start up and second phase funding to new businesses vs consumer protection
Recent in i t iat ives – a l ternat ive
banking regime• Legislation – currently in draft – consultation closes 14
May - still time to comment• Splitting of existing class of regulated activity under
FSA08 – Class 1 (deposit taking)• New Class 1(2) – banks that do no retail business of any
kind, purely for corporates and ultra HNW – not in compensation scheme
• Also Class 1(3) – representative offices (very limited)• Majority of existing banks remain Class 1(1) – general
business including retail clients, remain within compensation scheme
• Initial indications – niche banking
On the hor izon
• Further industry engagement• Credit Unions within regulatory legislation• Rule Book consultation• Further consultation on Insurance
(Amendment) Bill• Recovery and resolution • Please watch the website – newsletters etc.
Questions
The Isle of Man & the MONEYVAL Visit
Presentation to the Institute Chartered Secretaries Association – 11 May 2016
Karen Ramsay, Head of National Risk Assessment Cabinet Office
What we will coverImportance of the evaluation to the IOMWho are MONEYVALWhat they are looking forThe assessment teamThe interviewsThe process after the on-site visitQuestions
MONEYVAL EVALUATION 2016Last full evaluation by the International
Monetary Fund in 2008.Report published in 2009.IOM 10th equal with Estonia; Hungary; Portugal
and the UK.IOM joined MONEYVAL in 2012.Onsite evaluation took place 25th April – 6th May
2016.
Who are MONEYVAL ?One of 8 FATF style regional bodies (FSRB).
What is MONEYVAL looking for?
Work for the MONEYVAL evaluation began in Autumn 2014
2 detailed questionnaires have been submitted by the IOMTechnical compliance is assessed by off-site reviewThe on-site evaluation aims to test effectivenessThe effectiveness test is a new part of the assessment
processA country can have a good technical framework in place,
but if it is not being appropriately utilised, then the AML/CFT regime cannot be fully effective.
13 jurisdictions have so far gone through the whole process
the rest will be evaluated over the next 10 years
AssessorsMichael Stellini – team leader – Head of MONEYVAL’s
AML/CFT Monitoring UnitMatis Maeker – financial specialist – from EstoniaRadoslaw Obczynski – financial specialist – from
PolandAmar Salihodzic – law enforcement specialist – from
LichtensteinYehuda Shaffer – legal specialist – from IsraelStela Buic – legal specialist – from MoldovaVeronica Mets – MONEYVAL SecretariatAndrey Frolov – MONEYVAL Secretariat (Admin.)Andrew Le Brun –Trainee Secretariat – from Jersey
What the Assessors have been doing
MONEYVAL met with supervisors, investigators, prosecutors and industry (in total 80 meetings in 8.5 days).
Meetings included 8 banks; 7 insurance/pensions providers; 7 TCSPs; 5 Funds/Securities firms; 5 online gambling firms and 4 legal firms.
The purpose was to understand more complex issues and confirm known information.
MONEYVAL assess the Isle of Man as a jurisdiction and not the businesses operating in or from here.
Responses are used in aggregate to identify themes and trends.
Businesses will not be named in any report, public or private.
InterviewsThe main object of the visit was to conduct
interviews to evidence effectiveness.Meetings took place in the Cabinet Office. Week 1 mainly (not wholly) meetings with
Government and Week 2 with industry.MONEYVAL selected the firms it requested to meet
with.No regulator or government attendance at the
meetings with industry.It was for the business to decide who to field -
directors, MLROs and Compliance staff attended in the main.
How did it go?Everyone turned up for their meetings – on time
and prepared.It was apparent that the assessors had taken note
of the NRA both from the scoping note (sent in advance) and from the direction of questioning during the interviews.
Early indications are that there are no major surprises
However, hard to assess fully at this point - we will need to see the draft report.
Process is a ‘critical’ one and so it is difficult to get a balanced view from the 2 week on-site
After the onsite visitMONEYVAL procedures state that a first draft
report will be made available 2 months after the on-site visit
Reviewers will assess the assessorsSeptember 2016 – face-to-face meeting with
assessorsThe report will be scrutinised by member
countries before adoption by MONEYVAL at their December 2016 plenary meeting
FATF, IMF and the World Bank will be invited to assess the draft report for consistency of marking
Publication is expected early 2017
Contacts Cabinet Office
Karen Ramsay, Head of NRA, karen.ramsay@gov.im
Phone: 685332
Joanne Hetherington, NRA Manager joanne.hetherington@gov.im
Phone: 698369
Paul Heckles, AML/CFT Advisor, paul.heckles@gov.im
Phone: 685641
Stimulating Boardroom Energy
Easy to go wrong - Difficult to fixBut, there are practical solutions
Sharon Constanҫon
www.geniusmethods.com
Chatham House Rule
© Genius Methods Ltd 2016 29
Purpose of a Board is toadd value to the organisation it leads…
May 2016
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Genius Board Effectiveness Model
Intellectual Intelligence
Know the facts Fast assessment of information “Get it” well before others Make decisions Outcome driven Leaders Often strong egos Own agendas are clear Goal orientated Vertical skillset due to career path
IQ
May 2016
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Genius Board Effectiveness Model
EQ – Social Intelligence Challenge effectively Provide valuable support Good at communication Fine tuned intuition Sense risk Aware of others, self aware Think of others Influencers Collaborative Solutions Doing the right thing Focused on sustained future
IQEQ
May 2016
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Genius Board Effectiveness Model
"Tone at the top“
ethical climate ethical culture ethical principles ethical atmosphere guiding values
IQ
Tone
EQ
May 2016
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IQ
Culture
Tone
EQ
Genius Board Effectiveness Model
Organisational Culture
outcome of shared values, attitudes, standards, and beliefs
represents the collective values, beliefs and principles of members and is a product of such factors as history, product, market, technology, strategy, type of employees, management style and national culture
It can enable or hinder an organisation's strategy
May 2016
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Debate
Why do smart boards often fail to make the best decisions?
May 2016
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IQ
Culture
Tone
EQ
Genius Board Effectiveness Model
CHM
CEO
IQ
Culture
Tone
EQ
May 2016
Key Relationships
Chairman and CEO
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Leadership of the BoardLonely and awkward role of the Chairman
May 2016
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Leadership of the BoardChairman to lead in difficult times
May 2016
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Leadership of the OrganisationDriven and focused role of the CEO
May 2016 © Genius Methods Ltd 2016
Lead, show the way, walk the talk …
Support team to grow and learn …
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Leadership of the OrganisationAbility, Ego, Performer
May 2016 © Genius Methods Ltd 2016
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Leadership of the OrganisationBut can often clash …..
May 2016 © Genius Methods Ltd 2016
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Leadership of the OrganisationLeader of the Board & Leader of the Organisation
May 2016 © Genius Methods Ltd 2016
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IQ
Culture
Tone
EQ
Genius Board Effectiveness Model
CHM
COSECCEO
SID
IQ
Culture
Tone
EQ
May 2016
Key Relationships
CoSec and SID
Together and individually supporting the Board
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Home of EQ? Company Secretary Looking out for the Board, protective, process …
May 2016 © Genius Methods Ltd 2016
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Home of EQ? SIDObservant, competent, listener …
May 2016 © Genius Methods Ltd 2016
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Wisdom & EQ Powerful Effective Contributors
May 2016
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Triangle or Should it be a Square?Powerhouse of Leadership
May 2016
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CHM
COSECCEO
SID
IQ
Culture
Tone
EQEXEC
NED
Genius Board Effectiveness Model
May 2016
Key Relationships
NEDs and Execs
ChallengeAnd Assure
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NED dilemmas ….. Noses in – fingers out Follow your intuition
May 2016 © Genius Methods Ltd 2016
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NEDs – Independent thoughtAlone – within a team / Challenge the status quo
May 2016
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NEDs – SupportiveBalance between mentor and protector
May 2016
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Cornerstones of Effectiveness • Decision
Making• Involved• Informed
• Attendance• Knowledge.• Prepared ...
• MI……...……..• Tone & Style• Quality………
• Leadership• Trust• Airtime
NEDs Empowered Conversation
Challenge & AssuranceContribution
May 2016
Focus on the Effective Conversation
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Challenges to EffectivenessThe PEOPLE, EGO’s & FEARS
May 2016 © Genius Methods Ltd 2016
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Personal Agendas & Money Have Derailed Many Boards
May 2016 © Genius Methods Ltd 2016
Avoiding the warning signs?
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What can inhibit the Board?Common “elephants”
May 2016 © Genius Methods Ltd 2016
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Patronising Attitude
Unsafe Speak upRelationships
Respect Too Difficult
Ego Roles
Money
Hobby Horses Noise
Symptoms of Ineffective Behaviour
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Impacts of Ineffective Behaviour
May 2016 © Genius Methods Ltd 2016
Succession Planning
Committees FeedbackKnowledge
Use of skills Diversities Group Think
Make it Work Corporate Structure Information
Transparency Papers
Risk Strategy
Forward looking
GoalsDistance Tensions
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EQ / Intellect / Industry / Behavioural input
Cannot do a complete job internally
Can shoot the messenger and debate fully
Team can bond All have had input and
contribution Proportionate application
of Codes & Guidance
Difficult to see own mistakes
Fresh pair of eyes will always see issues
Independent input Unattributed Experience Tease out the difficult
questions Best Practice knowledge
and contribution
Genius Board Evaluation – Reasons Why …
Genius Board Evaluation – Benefits Gained
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Will listen and respectAble to challenge and debate as a teamEveryone has had time for reflectionChairman gains effectiveness insightsChairman understands what barriers existChairman coached on the nuances of behaviourChairman has clarity on steps to being a great BoardChairman has external sounding boardBenchmark for the journeyPlatform for next two yearsCompany Secretary has a roadmap Importance of behaviour is understood
May 2016 © Genius Methods Ltd 2016
Easy to go wrong - Difficult to fixThere are practical solutions
Stimulating Boardroom Energy
Sharon Constançon
sconstancon@geniusmethods.com
0207 612 9557
The Limits of Regulation in Establishing Improved GovernanceSimon Osborne FCIS, Chief Executive, ICSA
The Limits of Regulation in Establishing Improved Governance
Overview
Today I would like to cover governance from a regulatory perspective, in particular
• the limitations of the ways in which regulators attempt to influence governance
• the unrealistic expectations about the difference they can make
The Limits of Regulation in Establishing Improved Governance
The regulatory tool kit
Regulators have various tools at their disposal to address governance.
• Those actions intended to set out minimum acceptable standards and punish those who don’t meet them
• Those actions that are intended to raise standards above that minimum. This includes codes, guidance and exercising restraint
• Those actions intended to make market discipline work, eg disclosure requirements
The Limits of Regulation in Establishing Improved Governance
Regulation: the panacea
• Regulation to deter reckless behaviour, eg banks post financial crisis
• Regulation to stabilise, eg Bank of Uganda’s move to strengthen banks’ balances sheets
• Regulation to encourage growth. Banking resilience brings comfort to savers and means that people can borrow more, ultimately making the sector more competitive
The Limits of Regulation in Establishing Improved Governance
Clarity is key
• Regulators need to be clear about the objective they are trying to achieve
• Can multiple objectives be met by a single measure?
The Limits of Regulation in Establishing Improved Governance
Regulatory track record
Looking specifically at corporate governance in the UK, how have we done?
• Real progress has been made in overall standards of governance
• Better run and better advised boards
• Better board composition
• Diligent directors with a clear understanding of responsibilities and duties
• Better risk management at the top
The Limits of Regulation in Establishing Improved Governance
UK Corporate Governance Code: the good
• First Code was a market-led initiative with the objective of raising standards, while allowing flexibility in how to achieve them
• Explicit support of the UK government and regulators as an alternative to formal regulation
• By adding “comply or explain” requirement to the Listing Rules, the Stock Exchange ensured there was an element of market discipline
The Limits of Regulation in Establishing Improved Governance
UK Corporate Governance Code: the not so good
• There are limits to what it can achieve
• Certain systemic problems remain, eg directors’ remuneration
The Limits of Regulation in Establishing Improved GovernanceUnrealistic expectations: Directors’ remuneration
• First addressed in the Greenbury Report in 1995
• Guidelines on the make-up of remuneration packages
• Voluntary disclosure
• 2002 - mandatory reporting and an advisory vote
• 2013 - binding vote and additional reporting
The Limits of Regulation in Establishing Improved GovernanceDirectors’ remuneration
Reporting and voting is a classic “market discipline” mechanism. It gives the job of disciplining companies to investors.
Investors would argue that it is not their job to look after the public interest but to look after the long-term interests of their clients and beneficiaries.
If in doing so they happen to act in the public interest as well - great.
The Limits of Regulation in Establishing Improved GovernanceDirectors’ remuneration
Looking after the public interest is the job of governments and regulators.
• Government intervention to reduce pay could take the form of:
• Wage caps – not generally considered to be politically palatable, limits on bankers’ bonuses courtesy of the EU being a notable exception
• Reporting and voting requirements – an expectations gap between what the public thinks should be done and what those requirements can achieve
The Limits of Regulation in Establishing Improved GovernanceOne cannot live by regulation alone: be realistic
It is unrealistic to expect that by producing rules and codes intended to reduce governance failures, such failures can somehow be eliminated
It is inevitable that they will happen
The Limits of Regulation in Establishing Improved Governance
Influencing culture
The human element is the common thread that links the remaining governance challenges, whether it be issues of individual behaviour or organisational culture. And that is
why some of the tools we have relied on to make progress to date may be of limited use.
The Limits of Regulation in Establishing Improved Governance
Culture
Even more than other aspects of governance, culture is specific to individual organisations. Responsibility for addressing it has to rest with the board, as it always has.
The Limits of Regulation in Establishing Improved Governance
The role of the regulator in relation to corporate culture
• Prompt boards to pay attention
• Enforce proper penalties
• Make sure there is guidance, case studies or other resources to help boards think through the issues and apply them to their own circumstances
The Limits of Regulation in Establishing Improved Governance
One cannot live by regulation alone
A lot has been done over the last twenty years or so using codes and some regulation to improve governance systems. We have had a lot of success doing so.
But the need now is to tackle culture and behaviour. We need other tools for that part of the job. And, while regulators can either help or hinder, ultimately companies have to go the job themselves.
Isle of Man Conference 2016- Analysing Behavioural Risk
John Hurrell CEO, AirmicWednesday 11th May
2016
www.airmic.com
The Association for those responsible for risk management and / or insurance in their organisations
1200 members in 450 companies generally with turnover in excess of £1bn
Extensive research programme into risk related issues
www.airmic.com
• The UK Corporate Governance Code 2014 sets out explicit responsibilities for risk management and internal controls.
• The guidance includes specific reference to risk culture and assurance – to ensure that an appropriate culture is embedded throughout the organisation, including embedding risk considerations into reward systems.
Background
www.airmic.com
• Most risk failures are directly or indirectly as a consequence of inappropriate behaviours.
• Effective risk governance is achieved through the promotion of effective cultures and behaviours.
Culture and Behaviour – Airmic research findings
www.airmic.com
Roads to Ruin (Cass Business School)
Detailed investigation into the risk management failures at AIG (2005 – 2007), Arthur Anderson (2001), BP – Texas City (2005), Buncefield (2005), Cadbury Schweppes (2007), Coca Cola Dasani (2003), EADS Airbus (2006), Enron (2001), Firestone (2000), HSBC / Nationwide (2006), Zurich (2006), Independent Insurance (2001), Land of Leather (2008), Maclaren Pushchairs (2009), Northern Rock (2007), Railtrack (2000-2002), Shell (2004), Soc Gen (2007), UK Passport Agency (1999).
Lessons from – Ruin vs Resilience
www.airmic.com
Roads to Ruin 2011 (Cass)- Why did companies fail?
• Lack of board skill and NED control• Board risk blindness• Leadership failures• Poor communications• Organisational and risk complexity • Inappropriate incentives• Risk management ‘Glass Ceiling’
Lessons from – Ruin vs Resilience
www.airmic.com
Roads to Resilience 2014 (Cranfield)- Why did companies succeed?
• Exceptional Risk Radar• Flexible and diverse resources and
assets• Strong relationships and networks• Rapid response capability • Constant review and adaptation
Lessons from – Ruin vs Resilience
www.airmic.com
In depth case studies of;
AIGDrax PowerIHGJLR
Reviewing
• People and culture• Business Structure
• Strategy, tactics and operations
• Leadership and governance
ODATTPVirgin AtlanticZurich Insurance
Case study research into what does ‘good’ look like - Cranfield Business School 2014
Roads to Resilience
www.airmic.com
Risk Radar
• Everyone is responsible• Constant vigilance• Complacency engineered out• Constant questioning and challenge• Communication critical
Case StudyAIG Vulnerability
Identification Process
www.airmic.com
Relationships
• Shared common purpose• No blame culture – (“fix the problem” culture)• Flatter Structures• Engaged leaders
Case StudyVirgin and it’s
sub-contractors
www.airmic.com
Rapid Response
• Quick and appropriate action• Defined processes and teams• Ability to identify appropriate
resources quickly• Rehearsing and practising
Case StudyODA and terrorist
threat
www.airmic.com
Diversified Resources
• Actively managed dependencies
• Active networks with ability to switch rapidly
• Availability of crisis management expertise
Case StudyVirgin ‘Red’ Team
www.airmic.com
Review and Adapt• Active investigation through scenario planning• Learning is a core value• Near misses must be communicated• Active and transparent responses
Case StudyDrax ‘near miss’
voucher
www.airmic.com
Risk Responsive Roads to Resilience
Roads to Ruin Risk Compliant
Respond, Recover, Review
Prevent,
Protect &
Prepare
www.airmic.com
• It’s all about state of mind….
Why do so many companies appear unprepared and
unresponsive when the crisis hits?
www.airmic.com
Risk Governance perceptions – Before the crisis
www.airmic.com
The reality - After the crisis
www.airmic.com
Black Swans• Black swans represent 'unknown unknowns'.• As such, how can you plan for them?• But our research shows that you do not need to.• It's not black swans which are the threat!• It's ..............
www.airmic.com
It's Black Elephants!Our research shows- • The black elephant was always in the (board) room• But nobody saw it!• Or if they did, they chose to ignore it• But this black elephant had been visible to many
within the organisation• And obvious to all once the crisis had hit
www.airmic.com
Oversight of culture and behaviour
1. Embedded culture • Who assesses the impact of reward schemes / incentives on
the company’s approach to risk? Is this being managed?• Does the culture allow people to admit mistakes? Are the
lessons well communicated? Is there a ‘speaking up’ policy?• Does the board / senior management give a clear lead on risk
management? Is this supported by visible behaviour?• Are risk related communications open, transparent, honest and
objective?
www.airmic.com
2. Information and Communication • Do board papers and supporting reports allow
well informed board discussions?• Do board members seek to understand cultural
and behavioural risks?• Do the board understand risk inherent in the
business model?
Oversight of culture and behaviour
www.airmic.com
3. Information and Communication • Is the desired culture and required behaviour well
communicated to employees and networks?• Do the board / senior management assess whether these
messages have been understood?• Are employees and management aware of the need to
report any risk circumstances relating to brand and reputation?
• Is there a ‘Risk Management Glass Ceiling’?
Oversight of culture and behaviour
www.airmic.com
4. Accountability • Do NEDs feel empowered to seek further clarification and
assurance beyond the information in the board pack?• Are employees empowered to rectify risk related problems
which they identify?• Are risk agendas for board committees and senior functions
adequately co-ordinated, integrated and cross referenced?
Oversight of culture and behaviour
www.airmic.com
Questions
www.airmic.com
Dennis TourishProfessor of LeadershipRoyal Holloway, University of LondonCo-editor of ‘Leadership’Email: Dennis.Tourish@rhul.ac.uk
DYSFUNCTIONAL LEADERSHIP IN CORPORATIONS
Ken LayAKA ‘Kenny Boy’
Jeffrey Skilling
Amazon May 2016- 163253 books with ‘Leadership’ in their title. If you read one every day including weekends it would take you 447 years….
BUT – there are only346 books with ‘Followership’ in their title We have a fixation on leadership, though without followers there are no leaders…
SOME ASSUMPTIONS• Followers should
conform – mostly, do what they are told
• Leaders know best (but do they always?)• Dissent is resistance
to be overcomeWho’s the bossBBC 2March 2016
INVOLVEMENT… AND POWER
INVOLVEMENT… AND POWER
A MAJOR SOURCE
OF ERROR???‘The temptation to tell a Chief in a great position the things he most likes to hear is one of the commonest explanations of mistaken policy. Thus the outlook of the leader on whose decision fateful events depend is usually far more sanguine than the brutal facts admit.’
Winston Churchill (1931) INGRATIATION...
‘A lot of times in politics you have people look you in the eye and tell you what's not on their mind.’ --George W. Bush, Sochi, Russia, April 6, 2008
EFFECTS OF FLATTERY• A study of 451 CEOs looked at the impact on them of
more intense and frequent flattery (e.g., offering exaggerated compliments) and opinion conformity (e.g., expression of agreement even when people don't agree).• Flattery and opinion conformity linked to CEOs having more favourable evaluations of their own strategic judgments and leadership skills, being less likely to make strategic changes when firm performance suffered, and more prone to lead firms that suffered persistently poor performance.
Hyuan Park, Westphal and Stern, ASQ, 2011
EFFECTS OF NARCISSISM• Highly narcissistic CEOs less responsive to
whether recent firm performance was good or bad - continued to make equally risky investments (e.g. acquisitions of new companies) regardless of recent performance. Their less narcissistic peers more cautious in bad times and tended to take bigger risks during good times.
Chatterjee and Hambrick, ASQ, 2011
EFFECTS OF NARCISSISM• Less narcissistic CEO's weren’t affected
much by media praise. The highly narcissistic made riskier investments after getting praised in the media. The narcissists were swayed more by "social praise" and less by recent performance!
• ‘The only benefit of flattery is that by hearing what we are not, we may be instructed what we ought to be.’
Jonathan Swift
IRRATIONAL BIAS– ILLUSORY SUPERIORITY
• 69% of drivers consciously worry about being killed when driving
• Only 1% believe they drive worse than average
• 98% think they are safer than, or as safe, as the average driver. Brake (Road Safety Charity) Survey of 800 UK adults, March 2011
‘Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?’ George Carlin
PROBLEMS WITH FEEDBACK
People are especially sensitive to negative input – the ‘automatic vigilance effect’
HOW WE TREAT CRITICAL
FEEDBACK• Subjecting critical
feedback to criticism/ accepting positive feedback
• ‘I DON’T BELIEVE IT’• Deny failure
WHAT CAN BE DONE?• Seek out formal and informal
contact with people as often as possible
WHAT CAN BE DONE?
• Scrutinise positive feedback more rigorously than negative feedback
• Institutionalise dissent into the decision-making process – e.g. promote/ cherish/ reward contrarians
• Create a culture that confronts ‘the brutal facts of reality’ – i.e. where the truth is heard
A CLIMATE WHERE THE TRUTH IS HEARD
Lead with questions, not answers
Practice saying:• ‘I don’t know’• ‘What do you think?’• ‘Where have we gone wrong?’• ‘What could we do better?’
A CLIMATE WHERE THE
TRUTH IS HEARDEngage in debate, not coercion• Have chaotic meetings• Loud debate• Heated discussions• Healthy conflict
Dennis.Tourish@rhul.ac.uk
People with Significant Control
Peter Swabey, FCIS, Policy & Research Director, ICSA
Isle of Man Conference – 11th May 2016
The Small Business, Enterprise and Employment Act 2015
The Small Business, Enterprise and Employment Act 2015
‘SBEE Act’
A product of the Red Tape Challenge ………
The Small Business, Enterprise and Employment Act 2015A revised timetable ………….. AGAIN (15)
Full details of the latest timetable can be found on the Companies House website at :
https://www.gov.uk/government/news/the-small-business-enterprise-and-employment-bill-is-coming
The Small Business, Enterprise and Employment Act 201526 May 2015
Bearer shares were abolished. There is now a legislative timetable in place and any existing bearer shares must be surrendered by 26 February 2016.
The Small Business, Enterprise and Employment Act 201510 October 2015
The day element of the date of birth of directors was hidden from the public register
The accelerated strike-off process was introduced – down to two months from three – same with objections. Companies House no longer re-advertises a Gazette notice once a valid objection has expired
The requirement to give consent to act as a director or secretary has changed. The company confirms that consent has been given and Companies House will write to all newly appointed directors.
The Small Business, Enterprise and Employment Act 2015April 2016 (was December 2015)
The process to rectify the register in the event of director disputes or registered office disputes will be simplified.
If the director disputes the fact, the company must provide evidence of consent.
If a registered office address is disputed, Companies House will investigate and will have power to change the ROA to a default address
The Small Business, Enterprise and Employment Act 20156 April 2016
Companies will be required to keep a register of people with significant control (a PSC Register)
Implementing regulations for companies and LLPs were laid before Parliament on 25 January, and that these can now be found:
Companies - http://www.legislation.gov.uk/ukdsi/2016/9780111143018
LLPs - http://www.legislation.gov.uk/ukdsi/2016/9780111143025
PSC Register: policy
There are five core elements to new Part 21A of the Companies Act 2006 (CA06):
1.The definition of a ‘person with significant control’
2.The legal entities in scope of requirements
3.Obtaining the information
4.The register
5.Disclosure of and access to the information
BIS have replicated or extended existing company law criminal offences to deal with those who fail to provide information or provide false information.
PSC Register: definition
BIS have used the existing definition of ‘beneficial owner’ in the EU anti-money laundering context as the basis.
New Schedule 1A to the CA06 sets out five ‘specified conditions’. An individual meeting one or more of these conditions is a Person with Significant Control (‘PSC’):
1. Ownership of more than 25% shares2. Ownership of more than 25% voting rights3. Ownership of right to appoint or remove a majority of the board of directors4. Right to exercise significant influence or control5. Right to exercise significant influence or control over a trust or firm which trust or firm would be a PSC, were it an individual)
In certain circumstances a legal entity must be noted in the register (‘relevant legal entities’ or ‘RLEs’).
PSC Register: scopeAll UK companies, except companies listed on UK regulated or prescribed markets, and Limited Liability Partnerships will have to keep a PSC register.
PSC Register: obtaining informationCompanies must take reasonable steps to find out if they have any PSCs or RLEs and identify them.
In some cases the company will already have this information.
In others the company will need to serve notice on individuals and others. A person in receipt of such a notice is required to reply. Failure to do so is a criminal offence. Shares may also be subject to restrictions by the company.
PSCs and RLEs are also required to disclose their interest in the company to the company in certain circumstances.
PSC Register: the company’s registerCompanies must hold and keep available for public inspection a PSC register. This will contain information on the PSCs’:
•Full name•Service address•Country or state of usual residence•Nationality •Full date of birth•Usual residential address (not publicly available)•Date on which PSC obtained control•The nature of his or her control over the company
Register must be kept up to date as information changesPeople may access the register on request.
PSC Register: the central register
Companies must provide all the information in their PSC register to Companies House on incorporation and then at least once every 12 months as part of the new confirmation statement.
All information will be made available on the public register except:
• The full date of birth (only the month and year will be shown on the public register, except where the company elects to keep its PSC information solely on the register at Companies House)
• The usual residential address
PSC Register: the protection regime
Individuals at serious risk of harm will be able to apply to the registrar of companies to prevent their information being publicly disclosed on the company’s register and the central register.
Specified public authorities will have access to protected data on request.
BIS have recently consulted on this regime - https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/437974/bis-15-315-register-of-people-with-significant-control-consultation.pdf
Covers the scope, nature and extent of control, fees, the protection regime and warning and restrictions notices
PSC Register: guidance
Two types of guidance:
•Statutory
•Non-statutory
The legislation requires the Secretary of State to publish statutory guidance, which means that it has legal effect, on the meaning of ‘significance influence or control’ in the context of the PSC register.
PSC Register: guidance
Non-statutory guidance has been produced by a working group on behalf of BIS. This addresses such issues as:
•What is a PSC or an RLE and what do they need to do
•What information is being collected and why
•Who can access it and how
•Which companies are affected and what they need to do
•What ‘reasonable steps’ means
•What to do if you don’t receive the required information
•How to manage your PSC Register
PSC Register: guidance
Both sets of guidance can be found :
https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships
- and on the ICSA website
BIS have also published guidance for PSCs.
The Small Business, Enterprise and Employment Act 201530 June 2016
The new ‘check and confirm’ annual confirmation statement will replace the annual return. Companies will be required to begin filing their PSC Register information at Companies House. Private companies will also be able to choose to keep some of their registers at Companies House on their check and confirm date. The process for disqualifying directors will be ‘updated and strengthened’ and the statement of capital will be simplified.
The Small Business, Enterprise and Employment Act 2015
1 October 2016
With specified exceptions, companies will no longer be able to appoint corporate directors; they will have 12 months to remove any existing corporate directors that are no longer allowed under the exceptions.
BIS have been consulting on the exceptions to the prohibition of corporate directors. The implication is that companies will still be able to use corporate directors for administrative purposes, provided that all the directors of the corporate director are real people. It would be prudent to identify situations where your company use corporate directors and consider how you will comply with the new rules.
The Small Business, Enterprise and Employment Act 2015Late 2016 / early 2017
Some additional information will be able to be filed at Companies House – no doubt we will hear more closer to the time.
The UK implementation of the EU’s 4th Money Laundering Directive, expected in 2017, will have an impact on the filing of PSC Register information – we await information about the impact of this change.
PSC Register: implications for the Isle of Man
Companies must take reasonable steps to find out if they have any PSCs or RLEs and identify them
Isle of Man shareholders and companies may receive demands for information
• A person in receipt of such a notice is required to reply.
• Failure to do so is a criminal offence.
• Shares may also be subject to restrictions by the company.
PSCs and RLEs are also required to disclose their interest in the company to the company in certain circumstances.
Will the risk of having to respond to such enquiries and appear on a public register in the UK cause some investors to seek service providers in other jurisdictions ?
PSC Register: implications for the Isle of Man
Risk of regulatory creep
Will the Isle of Man Government and so Isle of Man companies find themselves under pressure to follow the UK model ?
Will the ‘nominated officer’ model introduced under the Companies (Beneficial Ownership) Act 2012 be regarded as sufficient ?
• Some concern in Channel Islands
• Increasing use of information-exchange arrangements – UK / IoM Agreement 12 th April 2016
PSC Register: implications for the Isle of Man
Information exchange agreement – 12th April 2016
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/518321/Sharing-beneficial-ownership-information-exchange-of-information-between-UK-government-and-government-of-Isle-of-Man.pdf
“The arrangement requires establishing and maintaining a central register, or equivalent system, containing accurate and current information on beneficial ownership for corporate and legal entities incorporated in their jurisdictions.
It also requires each jurisdiction to ensure effective and unrestricted access to this information to the other jurisdiction’s law enforcement and tax authorities”.
Target date : June 2017 but will not be a public register
Thought leadership from ICSA
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