icsa isle of man conference 2016

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

http://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, [email protected]

Phone: 685332

Joanne Hetherington, NRA Manager [email protected]

Phone: 698369

Paul Heckles, AML/CFT Advisor, [email protected]

Phone: 685641

mailto:[email protected]



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


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



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



"Tone at the top“

ethical climate ethical culture ethical principles ethical atmosphere guiding values

IQ

Tone

EQ

May 2016


IQ

Culture

Tone

EQ


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


Debate

Why do smart boards often fail to make the best decisions?

May 2016


IQ

Culture

Tone

EQ


CHM

CEO

IQ

Culture

Tone

EQ

May 2016

Key Relationships

Chairman and CEO


Leadership of the BoardLonely and awkward role of the Chairman

May 2016


Leadership of the BoardChairman to lead in difficult times

May 2016

38

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 …

39

Leadership of the OrganisationAbility, Ego, Performer


40

Leadership of the OrganisationBut can often clash …..


41

Leadership of the OrganisationLeader of the Board & Leader of the Organisation



IQ

Culture

Tone

EQ


CHM

COSECCEO

SID

IQ

Culture

Tone

EQ

May 2016

Key Relationships

CoSec and SID

Together and individually supporting the Board

43

Home of EQ? Company Secretary Looking out for the Board, protective, process …


44

Home of EQ? SIDObservant, competent, listener …



Wisdom & EQ Powerful Effective Contributors

May 2016


Triangle or Should it be a Square?Powerhouse of Leadership

May 2016


CHM

COSECCEO

SID

IQ

Culture

Tone

EQEXEC

NED


May 2016

Key Relationships

NEDs and Execs

ChallengeAnd Assure

48

NED dilemmas ….. Noses in – fingers out Follow your intuition



NEDs – Independent thoughtAlone – within a team / Challenge the status quo

May 2016


NEDs – SupportiveBalance between mentor and protector

May 2016


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

53

Challenges to EffectivenessThe PEOPLE, EGO’s & FEARS


54

Personal Agendas & Money Have Derailed Many Boards


Avoiding the warning signs?

56

What can inhibit the Board?Common “elephants”


57May 2016 © Genius Methods Ltd 2016

Patronising Attitude

Unsafe Speak upRelationships

Respect Too Difficult

Ego Roles

Money

Hobby Horses Noise

Symptoms of Ineffective Behaviour

58

Impacts of Ineffective Behaviour


Succession Planning

Committees FeedbackKnowledge

Use of skills Diversities Group Think

Make it Work Corporate Structure Information

Transparency Papers

Risk Strategy

Forward looking

GoalsDistance Tensions

59May 2016 © Genius Methods Ltd 2016

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

60

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


Easy to go wrong - Difficult to fixThere are practical solutions

Stimulating Boardroom Energy

Sharon Constançon

[email protected]

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 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


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


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?


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


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


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


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.


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 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


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’


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


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?


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’?


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?


www.airmic.com

Questions

www.airmic.com

Dennis TourishProfessor of LeadershipRoyal Holloway, University of LondonCo-editor of ‘Leadership’Email: [email protected]

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

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

http://images.google.co.uk/imgres?imgurl=http://www.endevil.com/images/George_Bush.jpg&imgrefurl=http://www.tooprogressive.com/2008/01&usg=__4kQN458yTZ74W4zmuS1eNOTbqAM=&h=390&w=300&sz=19&hl=en&start=2&um=1&tbnid=OXLWQjn6EAnHwM:&tbnh=123&tbnw=95&prev=/images?q%3DGeorge%2BBush%26um%3D1%26hl%3Den%26rlz%3D1T4GPEA_enGB301GB301%26sa%3DN

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

http://images.google.co.uk/imgres?imgurl=http://www.mayer-immobilier.com/anim-i-dont-believe-it-VictorMeldrew.jpg&imgrefurl=http://www.mayer-immobilier.com/pg-1&h=300&w=300&sz=13&hl=en&start=1&tbnid=PSJQjoBbew2V-M:&tbnh=116&tbnw=116&prev=/images?q%3DVictor%2BMeldrew%26svnum%3D10%26hl%3Den%26rls%3DGGLR,GGLR:2006-27,GGLR:en

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

http://images.google.co.uk/imgres?imgurl=http://slapnose.com/images/blog/0606/0606-inconvenient-truth.jpg&imgrefurl=http://slapnose.com/archives/2006/06/26/an_inconvenient_truth/&h=520&w=379&sz=33&hl=en&start=32&tbnid=y8j31bn7WajfTM:&tbnh=131&tbnw=95&prev=/images?q%3Dtruth%26start%3D20%26ndsp%3D20%26svnum%3D10%26hl%3Den%26rls%3DGGLR,GGLR:2006-27,GGLR:en%26sa%3DN

http://images.google.co.uk/imgres?imgurl=http://www.biblepicturegallery.com/Samples/ca/editors/sideline/An%20ostrich%20with%20his%20head%20in%20the%20sand.gif&imgrefurl=http://www.biblepicturegallery.com/pictures/Sideliners/An%20ostrich%20with%20his%20head%20in%20the%20sand%20ca.htm&h=480&w=640&sz=23&hl=en&start=14&tbnid=C6XpT2nu579vuM:&tbnh=103&tbnw=137&prev=/images?q%3Dostrich%26svnum%3D10%26hl%3Den%26rls%3DGGLR,GGLR:2006-27,GGLR:en

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?’

http://images.google.co.uk/imgres?imgurl=http://teaching.cs.uml.edu/~heines/images/questions.gif&imgrefurl=http://teaching.cs.uml.edu/~heines/images/&h=313&w=450&sz=59&hl=en&start=2&tbnid=QNgTCNRJ58ZjXM:&tbnh=88&tbnw=127&prev=/images?q%3Dquestions%26svnum%3D10%26hl%3Den%26rls%3DGGLR,GGLR:2006-27,GGLR:en

http://images.google.co.uk/imgres?imgurl=http://www.mod.uk/NR/rdonlyres/821677DF-C671-4B75-BC69-A1D20EE2823A/0/dumb_questions_693x984.jpg&imgrefurl=http://www.mod.uk/DefenceInternet/PictureViewers/DascSafetyPosterCatalogue2.htm&h=984&w=693&sz=112&hl=en&start=40&tbnid=TbBcHOeLNhbDMM:&tbnh=149&tbnw=105&prev=/images?q%3Dquestions%26start%3D20%26ndsp%3D20%26svnum%3D10%26hl%3Den%26rls%3DGGLR,GGLR:2006-27,GGLR:en%26sa%3DN

A CLIMATE WHERE THE

TRUTH IS HEARDEngage in debate, not coercion• Have chaotic meetings• Loud debate• Heated discussions• Healthy conflict

[email protected]

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


‘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

http://www.legislation.gov.uk/ukdsi/2016/9780111143018

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

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/437974/bis-15-315-register-of-people-with-significant-control-consultation.pdf



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.


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


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.


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 ?


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


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