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ICSA Isle of Man Conference 2016


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ICSA Isle of Man Conference 2016

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ICSA Isle of Man Conference 2016

  1. 1. The ICSA Isle of Man Conference 2016
  2. 2. ICSA 125: The Governance Institute Simon Osborne FCIS, Chief Executive, ICSA
  3. 3. 125 years of leading governance ICSA125 This 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
  4. 4. 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’
  5. 5. 125 years of leading governance Where 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
  6. 6. 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 •
  7. 7. 125 years of leading governance Encouraging the future faces of governance: • One to Watch, ICSA Awards • Tom Morrison Essay Prize
  8. 8. 125 years of leading governance Governance 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!
  9. 9. Regulatory Update Ro x a n n e O l d h a m – D i r e c t o r Po l i c y, L e 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
  10. 10. Creating one organisation – 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
  11. 11. Creating one organisation – 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
  12. 12. Creating one organisation – 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)
  13. 13. Recent initiatives – crowdfunding platforms • 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
  14. 14. Recent initiatives – alternative 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
  15. 15. On the horizon • 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.
  16. 16. Questions
  17. 17. Presentation to the Institute Chartered Secretaries Association – 11 May 2016 Karen Ramsay, Head of National Risk Assessment Cabinet Office
  18. 18. What we will cover  Importance of the evaluation to the IOM  Who are MONEYVAL  What they are looking for  The assessment team  The interviews  The process after the on-site visit  Questions
  19. 19. MONEYVAL EVALUATION 2016  Last 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.
  20. 20. Who are MONEYVAL ? One of 8 FATF style regional bodies (FSRB).
  21. 21. What is MONEYVAL looking for?  Work for the MONEYVAL evaluation began in Autumn 2014  2 detailed questionnaires have been submitted by the IOM  Technical compliance is assessed by off-site review  The on-site evaluation aims to test effectiveness  The effectiveness test is a new part of the assessment process  A 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
  22. 22. Assessors  Michael Stellini – team leader – Head of MONEYVAL’s AML/CFT Monitoring Unit  Matis Maeker – financial specialist – from Estonia  Radoslaw Obczynski – financial specialist – from Poland  Amar Salihodzic – law enforcement specialist – from Lichtenstein  Yehuda Shaffer – legal specialist – from Israel  Stela Buic – legal specialist – from Moldova  Veronica Mets – MONEYVAL Secretariat  Andrey Frolov – MONEYVAL Secretariat (Admin.)  Andrew Le Brun –Trainee Secretariat – from Jersey
  23. 23. 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.
  24. 24. Interviews  The 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.
  25. 25. 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
  26. 26. After the onsite visit  MONEYVAL procedures state that a first draft report will be made available 2 months after the on-site visit  Reviewers will assess the assessors  September 2016 – face-to-face meeting with assessors  The 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
  27. 27. Contacts Cabinet Office  Karen Ramsay, Head of NRA, Phone: 685332  Joanne Hetherington, NRA Manager Phone: 698369  Paul Heckles, AML/CFT Advisor, Phone: 685641
  28. 28. Stimulating Boardroom Energy Easy to go wrong - Difficult to fix But, there are practical solutions Sharon Constanҫon
  29. 29. Purpose of a Board is to add value to the organisation it leads… May 2016 © Genius Methods Ltd 2016 29
  30. 30. 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 May 2016 © Genius Methods Ltd 2016 30
  31. 31. 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 May 2016 © Genius Methods Ltd 2016 31
  32. 32. Genius Board Effectiveness Model "Tone at the top“  ethical climate  ethical culture  ethical principles  ethical atmosphere  guiding values May 2016 © Genius Methods Ltd 2016 32
  33. 33. 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 © Genius Methods Ltd 2016 33
  34. 34. Debate Why do smart boards often fail to make the best decisions? May 2016 © Genius Methods Ltd 2016 34
  35. 35. Genius Board Effectiveness Model CHM CEO May 2016 © Genius Methods Ltd 2016 35 Key Relationships Chairman and CEO
  36. 36. Leadership of the Board Lonely and awkward role of the Chairman May 2016 © Genius Methods Ltd 2016 36
  37. 37. Leadership of the Board Chairman to lead in difficult times May 2016 © Genius Methods Ltd 2016 37
  38. 38. Leadership of the Organisation Driven and focused role of the CEO May 2016 © Genius Methods Ltd 2016 38 Lead, show the way, walk the talk … Support team to grow and learn …
  39. 39. Leadership of the Organisation Ability, Ego, Performer May 2016 © Genius Methods Ltd 2016 39
  40. 40. Leadership of the Organisation But can often clash ….. May 2016 © Genius Methods Ltd 2016 40
  41. 41. Leadership of the Organisation Leader of the Board & Leader of the Organisation May 2016 © Genius Methods Ltd 2016 41
  42. 42. Genius Board Effectiveness Model CHM COSEC CEO SID May 2016 © Genius Methods Ltd 2016 42 Key Relationships CoSec and SID Together and individually supporting the Board
  43. 43. Home of EQ? Company Secretary Looking out for the Board, protective, process … May 2016 © Genius Methods Ltd 2016 43
  44. 44. Home of EQ? SID Observant, competent, listener … May 2016 © Genius Methods Ltd 2016 44
  45. 45. Wisdom & EQ Powerful Effective Contributors May 2016 © Genius Methods Ltd 2016 45
  46. 46. Triangle or Should it be a Square? Powerhouse of Leadership May 2016 © Genius Methods Ltd 2016 46
  47. 47. CHM COSEC CEO SID EXEC NED Genius Board Effectiveness Model May 2016 © Genius Methods Ltd 2016 47 Key Relationships NEDs and Execs Challenge And Assure
  48. 48. NED dilemmas ….. Noses in – fingers out Follow your intuition May 2016 © Genius Methods Ltd 2016 48
  49. 49. NEDs – Independent thought Alone – within a team / Challenge the status quo May 2016 © Genius Methods Ltd 2016 49
  50. 50. NEDs – Supportive Balance between mentor and protector May 2016 © Genius Methods Ltd 2016 50
  51. 51. Cornerstones of Effectiveness May 2016 © Genius Methods Ltd 2016 51
  52. 52. Focus on the Effective Conversation
  53. 53. 53 Challenges to Effectiveness The PEOPLE, EGO’s & FEARS May 2016 © Genius Methods Ltd 2016
  54. 54. Personal Agendas & Money Have Derailed Many Boards May 2016 © Genius Methods Ltd 2016 54
  55. 55. Avoiding the warning signs?
  56. 56. What can inhibit the Board? Common “elephants” May 2016 © Genius Methods Ltd 2016 56
  57. 57. May 2016 © Genius Methods Ltd 2016 Patronising Attitude Unsafe Speak upRelationships Respect Too Difficult Territorial Behaviour Cliques Ego Roles Money Hobby Horses Noise Symptoms of Ineffective Behaviour 57
  58. 58. Impacts of Ineffective Behaviour May 2016 © Genius Methods Ltd 2016 Succession Planning Committees Feedback Knowledge Use of skills Diversities Group Think Make it Work Corporate Structure Information Transparency Papers Risk Strategy Forward looking Goals Distance Tensions 58
  59. 59. May 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 59  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 …
  60. 60. Genius Board Evaluation – Benefits Gained 60  Will listen and respect  Able to challenge and debate as a team  Everyone has had time for reflection  Chairman gains effectiveness insights  Chairman understands what barriers exist  Chairman coached on the nuances of behaviour  Chairman has clarity on steps to being a great Board  Chairman has external sounding board  Benchmark for the journey  Platform for next two years  Company Secretary has a roadmap  Importance of behaviour is understood May 2016 © Genius Methods Ltd 2016
  61. 61. Easy to go wrong - Difficult to fix There are practical solutions Stimulating Boardroom Energy Sharon Constançon 0207 612 9557
  62. 62. The Limits of Regulation in Establishing Improved Governance Simon Osborne FCIS, Chief Executive, ICSA
  63. 63. 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
  64. 64. 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
  65. 65. 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
  66. 66. 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?
  67. 67. 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
  68. 68. 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
  69. 69. 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
  70. 70. The Limits of Regulation in Establishing Improved Governance Unrealistic 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
  71. 71. The Limits of Regulation in Establishing Improved Governance Directors’ 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.
  72. 72. The Limits of Regulation in Establishing Improved Governance Directors’ 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
  73. 73. The Limits of Regulation in Establishing Improved Governance One 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
  74. 74. 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.
  75. 75. 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.
  76. 76. 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
  77. 77. 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.
  78. 78. Isle of Man Conference 2016 -Analysing Behavioural Risk John Hurrell CEO, AirmicWednesday 11th May 2016
  79. 79. 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
  80. 80. • 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
  81. 81. • 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
  82. 82. 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 PassportAgency (1999). Lessons from – Ruin vs Resilience
  83. 83. 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
  84. 84. 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
  85. 85. In depth case studies of; AIG Drax Power IHG JLR Reviewing • People and culture • Business Structure • Strategy, tactics and operations • Leadership and governance ODA TTP Virgin Atlantic Zurich Insurance Case study research into what does ‘good’ look like - Cranfield Business School 2014 Roads to Resilience
  86. 86. Risk Radar • Everyone is responsible • Constant vigilance • Complacency engineered out • Constant questioning and challenge • Communication critical Case Study AIG Vulnerability Identification Process
  87. 87. Relationships • Shared common purpose • No blame culture – (“fix the problem” culture) • Flatter Structures • Engaged leaders Case Study Virgin and it’s sub- contractors
  88. 88. Rapid Response • Quick and appropriate action • Defined processes and teams • Ability to identify appropriate resources quickly • Rehearsing and practising Case Study ODA and terrorist threat
  89. 89. Diversified Resources • Actively managed dependencies • Active networks with ability to switch rapidly • Availability of crisis management expertise Case Study Virgin ‘Red’ Team
  90. 90. Review and Adapt • Active investigation through scenario planning • Learning is a core value • Near misses must be communicated • Active and transparent responses Case Study Drax ‘near miss’ voucher
  91. 91. Risk Responsive Roads to Resilience Roads to Ruin RiskCompliant Respond, Recover, Review Prevent, Protect & Prepare
  92. 92. • It’s all about state of mind…. Why do so many companies appear unprepared and unresponsive when the crisis hits?
  93. 93. Risk Governance perceptions – Before the crisis
  94. 94. The reality - After the crisis
  95. 95. 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 ..............
  96. 96. 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
  97. 97. 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?
  98. 98. 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
  99. 99. 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
  100. 100. 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
  101. 101. Questions
  102. 102.
  103. 103. Dennis Tourish Professor of Leadership Royal Holloway, University of London Co-editor of ‘Leadership’ Email: DYSFUNCTIONAL LEADERSHIP IN CORPORATIONS Ken Lay AKA ‘Kenny Boy’ Jeffrey Skilling
  104. 104. 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 only 346 books with ‘Followership’ in their title We have a fixation on leadership, though without followers there are no leaders…
  105. 105. SOME ASSUMPTIONS • Followers should conform – mostly, do what they are told • Leaders know best (but do they always?) • Dissent is resistance to be overcome Who’s the boss BBC 2 March 2016
  108. 108. 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...
  109. 109. ‘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
  110. 110. 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
  111. 111. 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
  112. 112. 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
  113. 113. 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
  114. 114. ‘Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?’ George Carlin
  115. 115. PROBLEMS WITH FEEDBACK People are especially sensitive to negative input – the ‘automatic vigilance effect’
  116. 116. HOW WE TREAT CRITICAL FEEDBACK • Subjecting critical feedback to criticism/ accepting positive feedback • ‘I DON’T BELIEVE IT’ • Deny failure
  117. 117. WHAT CAN BE DONE? • Seek out formal and informal contact with people as often as possible
  118. 118. 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
  119. 119. 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?’
  120. 120. A CLIMATE WHERE THE TRUTH IS HEARD Engage in debate, not coercion • Have chaotic meetings • Loud debate • Heated discussions • Healthy conflict
  121. 121. People with Significant Control Peter Swabey, FCIS, Policy & Research Director, ICSA Isle of Man Conference – 11th May 2016
  122. 122. 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 ………
  123. 123. The Small Business, Enterprise and Employment Act 2015 A revised timetable ………….. AGAIN (15) Full details of the latest timetable can be found on the Companies House website at : employment-bill-is-coming
  124. 124. The Small Business, Enterprise and Employment Act 2015 26 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.
  125. 125. The Small Business, Enterprise and Employment Act 2015 10 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.
  126. 126. The Small Business, Enterprise and Employment Act 2015 April 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
  127. 127. The Small Business, Enterprise and Employment Act 2015 6 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 - LLPs -
  128. 128. 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.
  129. 129. 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% shares 2. Ownership of more than 25% voting rights 3. Ownership of right to appoint or remove a majority of the board of directors 4. Right to exercise significant influence or control 5. 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’).
  130. 130. PSC Register: scope All UK companies, except companies listed on UK regulated or prescribed markets, and Limited Liability Partnerships will have to keep a PSC register.
  131. 131. PSC Register: obtaining information Companies 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.
  132. 132. PSC Register: the company’s register Companies 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 changes People may access the register on request.
  133. 133. 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
  134. 134. 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 - ile/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
  135. 135. 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.
  136. 136. 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
  137. 137. PSC Register: guidance Both sets of guidance can be found : significant-control-requirements-for-companies-and-limited-liability- partnerships - and on the ICSA website BIS have also published guidance for PSCs.
  138. 138. The Small Business, Enterprise and Employment Act 2015 30 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.
  139. 139. 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.
  140. 140. The Small Business, Enterprise and Employment Act 2015 Late 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.
  141. 141. 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 ?
  142. 142. 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 12th April 2016
  143. 143. PSC Register: implications for the Isle of Man Information exchange agreement – 12th April 2016 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
  144. 144. Thought leadership from ICSA