Company Secretary Snapshot

Welcome to our snapshot of key changes and current affairs for Company Secretaries working in social housing.

Housing Ombudsman Guidance: Effective Involvement of Governing Bodies in Handling Complaints

The Housing Ombudsman has published new guidance on the effective involvement of Boards and Councillors in handling resident complaints.

The Guidance emphasises the importance of fostering a positive complaints culture from the ‘top down’, feeding into assurance obtained by the Board that the organisation is effectively delivering its charitable purposes (where it is charitable) and strategy.

Fostering a ‘learning’ culture enables organisations to learn from failure, identify where issues arose and use these to improve the business. Boards can support this by taking an active role, obtaining assurance that:

• The organisation complies with best practice – e.g. the Complaint Handling Code
• All employees are trained on the complaints process
• The process is promoted to residents
• The organisation (and the Board) is benefitting from cross-organisational learning and knowledge sharing
• Monitoring is in place for publications from the Housing Ombudsman including the outcome of investigations into other landlords – this should feed in to active review of processes in light of any recommendations (as they may highlight risks / weaknesses), and key themes should be reported back to the Board / committee structures

It is acknowledged there is a balance to be struck between operational detail and ensuring that the Board obtains enough detail to fulfil its overarching ‘stewardship’ role. Your Board has freedom to decide what it wishes to receive by way of assurance and information, but the following is suggested by the Guidance as being particularly helpful:

• Internal complaint performance report including complaint type, timeliness and outcomes – and updates on any significant actions resulting from complaints
• Housing Ombudsman annual landlord performance reports
• Resident feedback – you will have existing mechanisms for collecting and reporting on resident satisfaction. These should be reviewed as part of preparing for Social Housing White Paper reforms
• Horizon scanning – key changes in the sector that will impact residents and the delivery of housing services

Where you have a committee structure in place to consider customer complaints, thought should be given about the information that makes its way back to the Board. Complaints can operate as a barometer for Boards and alert them to key risks. Effective handling of complaints (and an audit trail evidencing this) will also support environmental, social and governance (ESG) credentials, key to unlocking future external investment.

Regulatory downgrades

Our monthly review of regulatory upgrades/downgrades/regrades in the sector has highlighted the following themes:

• Ensure your controls are strong when approaching key risk areas such as development, but also for the ‘business as usual’ where it is easier to become complacent. Particular issues were highlighted within rent setting and property allocations.
• How do you evidence independence and probity in your third party relationships and arrangements? You must ensure that you are not ‘inappropriately advancing’ the interests of third parties through your activities (or could subjectively considered to be doing so).
• Check your assets and liabilities register is being updated, and remember to ‘spot check’ it for accuracy. You should have a monitoring and review process in place. It is also important to reflect on any triggers for a refresh, for example an organisational re-structure.
• There is a continued focus on risk management, ensuring the alignment of strategic and operational risk assessments and reviewing the assurance the board receives on the management of key risks such as health and safety.
• In relation to stress testing, ensure scenarios test against security in stress situations, and recovery planning and mitigation strategies should be effective and evidenced.
• Data integrity and the quality of routine reporting to board on key issues such as compliance and security.
• Value for money to make more effective use of financial resources – where there is financial capacity then this should be used to actively pursue the strategic objectives of the organisation, and targets should be monitored carefully during the life of the corporate plan to ensure they can be updated in light of progress.

Board diversity and effectiveness in FTSE 350 companies

On 20 July 2021, the Financial Reporting Council published a report called ‘Board diversity and effectiveness in FTSE 350 companies’ in conjunction with London Business School, Leadership Institute and SQW.

The main findings of the research concluded that:

• It is the responsibility of the Chair of a board to drive inclusion.
• Regulators and companies must focus on collecting more data on the types of diversity, board dynamics and social inclusion.
• Nomination Committees should be diverse and have a clear mandate to work with search firms that access talent from wide and diverse pools.
• The greater representation of women in the boardroom is reshaping culture and dynamics and benefiting businesses from a social justice as well as a performance perspective.

The report found that the effort to diversify boards pays benefits in terms of boardroom culture and performance.  To maximise these benefits boards should recognise that change takes time and that diversity without active inclusion is unlikely to encourage new talent to the board.

It is hoped that this report will stimulate new thinking and action on how all groups can genuinely feel included and supported at the ‘top table’.

Financial Reporting Council Lab report on reporting on stakeholders, decisions and section 172

On 19 July 2021, the FRC Financial Reporting Lab published a report outlining the information that investors require in order to understand how an organisation is progressing towards its purpose and delivering long-term success.

Stakeholders

The report outlines that investors regard information on key stakeholders as crucial to understanding the business and its future prospects. Information on how these stakeholders influence the operation of the business model and delivery of strategy includes:

• Who are the stakeholders relevant to a company’s success
• Why are these key stakeholders important
• What is important to the company’s key stakeholders
• What actions is the company taking to build and maintain strong relationships with its key stakeholders
• What could affect key stakeholders and how do they affect the company
• What is measured, monitored and managed in relation to stakeholders

Decisions

The report states that to understand how an organisation is progressing in meeting its purpose and its pursuit of success, investors want information on management and Board decisions.

The report highlights that delegation of decision-making has led to some concern about disclosures on decisions by the Board, particularly to address the section 172 Companies Act 2006 duty on directors to promote the success of the company. In particular, how to report decisions at a subsidiary level when decision making is centralised or subsidiaries are not operational. This can be a key issue in RP structures where there may be many trading or development subsidiaries across different ‘tiers’ who delegate to a group committee or central Board.

The report indicates that investors want organisations to report:

• What were the decisions of strategic significance during the year
• How and why the board reached each principal decision
• How stakeholders were considered in reaching each principal decision
• What are the difficulties or challenges in making the decision
• What are the expected and/or actual outcomes of each principal decision

Section 172 statements

Section 172 statements require directors to explain how they considered the interests of the company when performing their duty to promote the success of the company. The report concludes that better section 172 statements:

• Do not only focus on stakeholder engagement but also other aspects of section 172 such as the interests of employees, sustainability etc.
• Discuss principal decisions (linking to long-term success of the company) and how stakeholders and other factors were considered in making those decisions.
• Bridge information on stakeholders and decisions by considering them in a two-way approach, and incorporate both in the statement (even if by cross-referencing).
• Can be a standalone source of information which are still concise if cross-referencing is used well.
• Fit into a connected narrative linking to business model, strategy and how business is done (through consideration of governance and culture) demonstrating how the organisation is progressing in its pursuit of its purpose and long-term success.

The report provides practical tips for approaching section 172 statements, which include:

• Consider whether the templates for board papers, agendas and minutes need prompts on all aspects of section 172 (not just consideration of stakeholders).
• As much as possible, the person(s) responsible for drafting the section 172 statement should attend board and/or committee meetings to facilitate the drafting and better reflect the board's priorities and actions.
• The section 172 statement should reflect how the section 172 duty is met throughout the year. Accordingly, consider gathering information throughout the year to compile the statement rather than rolling forward and tweaking the statement at the end of the year.
• Consider where best to include the section 172 statement within the annual report so that it clearly reflects links to strategy and other parts of the report.
• Consider bi-directional cross-referencing where the section 172 statement links to where various components of the annual report provide more detail on highlights provided in the statement, and those sections then link back to the statement.

Although the report does relate to companies, it provides some helpful tips and guidance on how to improve annual reporting, and is a helpful resource for organisations look to pursue ESG finance where investors will be looking more closely than previously at quality of reporting.

AOB

We are hitting the summer holidays now so there may be a short lull in some of our events, but we are looking forward to a busy autumn with the following events coming up:

• CIH Housing 2021 Conference (7-9 September)
  If you are attending the event in Manchester this year, do let us know.  It would be great to see you!

• Committee Chair’s Network
• Next webinar instalment of Fit for Purpose Structures series on mergers
• SID Network – Our next Network event will take place in October. If your Senior Independent Director would like to join us, please email Greenhalgh@BevanBrittan.com

In the meantime, check out:

• Housing Finance Spotlight – July edition
  Our monthly newsletter providing a snapshot of banking and finance updates and opinion for those based within affordable housing and local government.

• On Demand: Fit for Purpose Structures series– What can we learn from governance downgrades? in partnership with DTP
  In this edition of the series, our panel from DTP, Broadacres Housing, Gentoo Group and the Regulator of Social Housing considered previous regulatory downgrades and what they teach us - including how good governance is central to managing sustainable growth and change: learning the lessons from the past to inform your plans for the future.