Welcome to our snapshot of key changes and current affairs for Company Secretaries working in social housing.
EcoDa Report on Corporate Governance Guidance and Principles
The European Confederation of Directors Associations (ecoDa) has published updated guidance for unlisted companies on the issues involved in designing an appropriate corporate governance framework. Although designed for Europe, the Institute of Directors in the UK participated in updating it.
New elements include:
- A focus on ESG issues.
- Adding a well-developed corporate purpose, a healthy culture, the consideration of sustainability in decision-making, and diverse perspectives to the high level principles that the previous version of the report set out as being the foundation of good governance.
- Updating the 14 principles of good governance to reflect that boards should:
- Take into account an appropriate level of diversity in board composition
- Maintain a system to safeguard the long-term interests of stakeholders, and
- Have a dialogue with other key stakeholders in addition to shareholders.
- Encouraging companies to consider how to communicate their governance framework through a corporate governance statement in their annual report or on a website.
- Providing a voluntary corporate governance self-evaluation tool to measure periodically the degree of application of the voluntary corporate governance principles, as well as define plans for the future.
The updates very much follow the themes arising from other publications, including the NHF Code of Governance 2020, but the guidance is well worth reviewing to offer a wider perspective on good governance outside of the social housing sector.
FCA Covid-19 update
The FCA has recognised that some mutual societies are still experiencing delays in producing annual returns and accounts as a result of the pandemic. The FCA has updated its website to reflect that for annual returns and accounts due for submission by 31 October 2021, they will not take any action to follow-up on delayed submissions where the delay is 3 months or less.
Say on Climate
‘Say on Climate’ refers to the adoption by organisations of an annual shareholder vote on climate strategies, which is becoming a ‘hot topic’ amongst large corporates. Glass Lewis has published its initial observations and considerations where organisations are considering whether to adopt this approach.
The publication outlines a number of benefits to adopting a Say on Climate vote including ensuring that it is firmly on the agenda for both organisations and their investors, ensuring that organisations are producing robust financial disclosures that will allow shareholders to understand how climate is being taken into account in strategies and therefore challenge appropriately.
Interestingly, it outlines the differing views of investors in relation to this topic – noting that the UK’s Local Authority Pension Fund Forum and Legal & General Investment Management have indicated support, but that there is scepticism elsewhere. This includes:
- concerns that such a vote would limit board accountability for climate strategies
- plans being seen as routine and therefore reduced challenge
- limited overall effect on quality of climate change strategies
- lack of expertise of shareholders who would be ‘rubber stamping’ strategies.
This will be of interest to providers considering how to involve their investors and other stakeholders in division of their climate strategies – particularly when thinking about resident engagement and investment decisions in light of the Charter for Social Housing Residents: Social Housing White Paper.
It is helpful to monitor themes arising from governance downgrades in the sector, in order to monitor key risks and ensure you are reviewing and challenging your own governance functions regularly.
Downgrades from this month include the following themes:
- Integrating business planning and risk management processes and ensuring that performance monitoring aligns with your strategic objectives.
- A continuing focus on stress testing – ensuring it takes into account the full range of risks your organisation is exposed to, including constant review and development of early warning triggers and mitigation strategies.
- Data integrity and management - including keeping your asset and liabilities registers up to date.
- Timeliness and co-ordination of management reporting.
- Ensuring your controls reflect your policies and procedures (and that these evolve as those policies and procedures are reviewed and updated in line with best practice.
Look ahead – planning for the ‘Accountable Person’ and ‘Responsible Person’ roles
Upcoming regulatory and legal reforms will require Company Secretaries and governance teams to review their governance frameworks – including thinking about the new / revised roles proposed. These include:
1. Accountable person proposed by the Building Safety Bill. This role arises from the Hackitt Review following the Grenfell Tower fire, and is part of a drive to ensure that there is greater accountability of those in control of buildings. The purpose of the role is to ensure that there is an entity taking responsibility for the building through its life, from design through to construction and occupation. The draft bill states that the ‘accountable person’ will be the ‘person’ that holds the legal estate in the building, or that holds a relevant repairing obligation in relation to the common parts of that building.
Providers themselves will therefore likely be the accountable person in respect of the high risk buildings they own (over 18m or 6 storeys tall, with more than 2 separate occupancies) and the responsibilities associated with this role within the legislation will fall to the provider’s board.
These reforms are expected to take effect later this year, and organisations should review the responsibilities outlined in the Bill against their existing delegations framework including executive level delegations and committee terms of reference. Regular monitoring and reporting back to the board in each area will also be required in order to enable the board to fulfil these duties. Overall, this is likely to dovetail with any changes made as a result of the expectations around the board’s role and responsibility for health and safety in the NHF Code of Governance 2020.
2. Responsible person proposed by the Charter for Social Housing Residents: Social Housing White Paper. In due course, providers will be required to identify a ‘responsible person’ who will ensure that the organisation is complying with the Consumer Standards, as part of a broader requirement for providers to provide greater clarity on the roles and responsibilities of senior level staff. Whilst the White Paper indicates that it will be up to each provider to determine who is most suitable to hold this role, it is envisaged that this person will be senior enough to drive cultural change where needed, and to ‘unite’ the provider in delivery of good quality customer service. The individual will need to be identified to the Regulator of Social Housing, Housing Ombudsman and to tenants. In the case of a large provider it is suggested it would be held by a senior executive, or the chief executive of a small association.
Whilst this role covers more than health and safety, it is clear that the arrangements in respect of the ‘accountable person’ above will need to feed in to the responsible person’s duties in respect of these aspects of the Consumer Standards (current and revised) too. This requirement is likely to be some way off implementation, but providers should consider adopting such a role earlier to allow this to ‘bed in’ and to inform the shape of the reforms.
Following on from our Snapshot last month where we looked at proposed charity law reforms proposed by the Law Commission in its 2017 report ‘Technical Issues in Charity Law’, the Queens speech on 11 May introduced a Charities Bill: “Legislation will support the voluntary sector by reducing unnecessary bureaucracy…” The purpose of the Bill is to address a range of issues in charity law which hamper charities’ day to day activities.
As a reminder, the main elements of the reforms are:
- Changing the law to help charities amend their governing documents more easily with Charity Commission oversight where appropriate.
- Giving charities more flexibility to obtain tailored advice when they sell land, and removing unnecessary administrative burdens.
- Increasing flexibility for charities to use their permanent endowment (assets or investments where the capital value must be preserved), with checks in place to ensure its protection in the long term.
- Removing legal barriers to charities merging, when a merger is in their best interests.
The bill has had its first reading in the House of Lords with no estimated commencement date currently.
NHF Governance Conference
Join Sarah Greenhalgh on 17 June, as she presents at the NHF Governance Conference. Sarah will be joined by Jenny Neville, Group Executive Director of Forviva and Zoe Ollerearnshaw, Group Company Secretary of Hyde to discuss “Business planning: a fit for purpose corporate structure”.
Bevan Brittan Events
The first of our ‘fit for purpose structure’ events are being held in June and July. This includes:
- Fit for purpose structures: Joint ventures – asking the key questions upfront
Thursday10 June, 10-11am
- SAVE THE DATE
Fit for purpose structures: What can we learn from governance downgrades?
In partnership with DTP
Thursday 15 July
You can register to attend any of our webinars via our events webpage. We hope you can join us!