Posted: 14th November 2016

First published by ICSA's Governance + Compliance magazine

Increasing individual accountability, greater focus on regulation and expanding board packs are some of the reasons cited as to why firms are struggling to replace outgoing non-executives with people who have the ability, experience and know-how to oversee their firm’s activities while keeping it safe from a conduct perspective.

Earlier this year, Huntswood (regulation and conduct risk experts) and Board Intelligence (board reporting specialists) spoke to company secretaries (cosecs) from across financial services to explore the implications of changes taking place in the financial services sector. The increasing turnover of non-executive directors is a prime concern as highlighted by the comment from one company secretary who told us:

 “I wouldn’t want to be a NED, certainly not in a distressed bank. We’re starting to see a turnover of non-execs – they’ve done their three years and want an easier life. This affects the calibre of directors in the market. SMR [formerly the senior managers regime now known as the individual accountability regime] will exacerbate this.”

Although as yet, there is no empirical data to demonstrate this trend, this testimony should be an early warning sign to the industry, the regulator and individual firms.


With individual accountability now in force for many financial service firms (and being rolled out to all FSMA-regulated firms by 2018) certain questions are appearing: How can the increasing regulatory responsibility placed upon non-executives be handled in a way that ensures industry-wide compliance yet retains a sustainable pool of burgeoning non-executive talent? Is there a need for company secretaries to take on a more proactive role to further support their boards?  

Our research highlighted that the role the company secretary plays varies from firm to firm. While this can be dependent on the complexity of the operation and company size, often it’s a feature of how company secretaries have operated in organisations in the past.

The modern-day company secretary role should no longer be seen as administrative. Note taking or being responsible for filing board minutes with Companies House may well be part of their package of responsibilities (these activities can be vital in satisfying regulatory obligations), but they also have an important role to play in:

  • Evidencing the contribution of board members
  • Justifying specific conduct decisions made by the business
  • Ensuring effective financial crime risk discussion and management is taking place
  • Aligning the board calendar with board priorities and business needs 
  • Upholding the quality of board papers and supporting report-writers if necessary

Is this how your board sees the company secretary’s role currently?

The most forward-thinking firms are now looking to their company secretary to be ‘board advisers’, responsible for the company’s corporate governance and with an obligation to keep the board up-to-date with the knowledge, skills and expertise they require to handle the changing environment in which they operate.

The majority of company secretaries are clear about the issues facing their firm, and what needs to happen about them. One told us; “Our problem is not that we don’t lack information, it’s that the right information needs to be in front of [the] highest level of people. There’s so much information, it’s tricky to get to the heart of what could be a potential issue. We need to get away from a pack that’s hundreds of pages and move to KPIs and dashboards that really allow them to make decisions”.

Aligning Cosec activity to regulatory needs

With this in mind, what can firms do to ensure company secretaries are best placed to provide this support?

Driving the board agenda

Clear scope on what the board needs to be provided with – collaborative conversations and outside regulatory expertise can be effective in order to stay abreast of the specific themes and issues facing firms (and therefore which MI will need to be presented and how)

Driving non-executive director development

Many firms already have a non-executive development programme in place, however, it often varies significantly between organisations – with the regulator’s approach becoming more ‘intrusive and invasive’, all company secretaries in our research agreed that helping NEDs keep up to date with changes in regulation is vital

Enabling effective decision making

A level of autonomy should be given over the way MI is displayed and ‘brought to life’, supplemented by open conversations with the board and the wider firm over what might improve MI accuracy

As well as streamlining board packs, some company secretaries are working with their chairmen and CEOs to review the frequency and duration of board meetings. Some firms are attempting to replace monthly, all-day meetings with shorter sessions held every other month, allowing more action to be taken between meetings and enabling company secretaries increased time to prepare and distribute relevant, focused, up-to-date information

Managing conduct risk

There should be a commitment from the business to periodically review the information being provided to the board against current regulatory issues and their implications – doing this will ensure board packs stay ‘on the pulse’ of regulation and allow them to show their effective mitigation of risk

Enhancing the company secretary role

Much of this activity and enabling work will clearly need to come from firms, and this opens up wider questions about the need for the industry to recognise this and drive to develop the cosecs of the future.

Cosec ‘Careerists’

A shrinking non-executive director pool in financial services has resulted in many non-executive directors commenting that they’re “putting in far more hours than being rewarded for”. In addition, the risk to non-executives’ reputation, income and freedom (under the new regulatory framework, non-executive directors are liable for unlimited fines, clawback, lifetime bans and up to seven years prison term for reckless misconduct in the management of a bank) is resulting in company secretaries having to take on greater responsibilities of the type outlined above.

However one contributor to our research questioned the ability of some of their peers to handle the challenge. His concern is that the industry is “not breeding company secretaries of the future. There needs to be more of a shift towards different types of professionals. Lawyers tend to be far more rigid in their approach; the [company secretary] role’s changed, not in intent – it’s always been advisory – but the need is for individuals to be far more dynamic and pragmatic”. The same concern was echoed by another respondent who commented: “Retaining and attracting talent is a real challenge. The cosec team requires resources and personalities fit for purpose and these are increasingly hard to find”.

With this in mind, can your firm look for opportunities to foster the talent of the cosecs of tomorrow? Should your firm be examining the way it views the company secretary role and circumventing the risk of the role becoming bloated and unattractive to those with genuine talent? Not all firms will need to completely redefine their company secretary’s role, but all firms should be thinking about the benefits of developing their cosec talent.

 The commercial and regulatory benefits

While regulatory and conduct risk changes over the past 12 months (including the individual accountability regime) have increased the need for boards to review their current approach, regulators are clear that long-term success shouldn’t be driven purely by regulatory issues. Boards must preside over a culture that examines regulatory issues and changes against the commercials, the specific risks, the risk appetite of the firm, and whether any proposed reaction to regulation is proportionate. Company secretaries can be intrinsic to firms achieving the right balance here.

If firms are able to rely on their company secretaries to provide the requisite regulatory knowledge and challenge (possibly through further supporting their regulatory education, or, in the case that their regulatory experience is good, giving the required autonomy), the board and non-executives will be in a great position to:

  • Further understand the risks their firms face
  • Arrive at a solution that deals with those risks proportionally
  • Make the required changes to products and process
  • Record and retain the justification as to why they made the decision (i.e. how it was designed to improve customer outcomes)

One pre-requisite to this in the long-term is ensuring that the current routes to becoming a company secretary are aligned with the need in the industry – i.e. company secretaries’ within financial services increasingly need to have regulatory knowledge. The formation of a reliable ‘journey’ which enables aspiring company secretaries to gain a contemporary set of skills will benefit boards across the industry. This will more than likely start with individual firms and the way they spot and foster talent.

It is clear that the board’s understanding of the regulatory issues they face will always be imperative, and so setting up your approach as above and allowing it to begin its positive effect is just the first step. It’s the ongoing maintenance of that approach (and ensuring the required changes are made) which will truly enable boards to move forward with the confidence that they have a clear view of regulation via their company secretary.

Read the full report here

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