Directors and Company Secretaries face greater responsibility in managing risk.
Directors and Secretaries of a company are usually the ones spearheading the efforts of any successful company. They are responsible for the well being of a company and its successful development. In times when a company is facing difficulty and any arising problems, the burden, again, falls onto the shoulders of Directors and Secretaries. It is therefore not surprising that under the Third Edition of the ASX Corporate Governance Principles and Recommendations, Directors and Secretaries will be faced with more responsibility and more stringent standards for their performance.
Risk Management
Directors are expected to be more involved in analysis, consideration and taking on existing risk managements systems. This will guarantee the successful and efficient management of business risks.
As per Recommendation 7.1 of the Corporate Governance Council (‘CGC’), an independent risk management committee should be established. Such a committee would be most effective if it has at least 3 members who hold the required technical industry knowledge and is made up of directors who are completely impartial.
Company Secretary Role
Recommendation 1.4 of the CGC states that an effective company secretary would support the directors in their company duties and fill any gaps in responsibility. Specifically, the company secretary should answer to the board on any and all matters concerning “proper functioning of the board.”
The role of the secretary includes but is not limited to:
providing advice to the board in connection with committees and governance matters;
supervising and managing the policy and procedures of the board and that are followed as per all regulations; and
correctly and diligently keeping record of all minutes for all board matters and meetings.
Directors
As expected, directors are held to a higher standard which is also objective in nature. The director must be completely free of any personal or business conflicts, and have no personal stake in the matters of the company. Anything that might appear as material to affect to the director’s ability to make independent decisions is absolutely prohibited.
Future Assessments of the Company Management Personnel
The CGC recognizes the importance of having individuals who understand the functions and culture of the company completely. At the same time, the CGC strongly recommends regular review of the responsibilities and performance of directors and secretaries within the company to ensure that they are not so deeply connected to the business that they are no longer able to make objective and impartial decisions.
The key ability of all individuals involved in the management committees must be absolute and clear independence.
What Should I Do Next?
Contact us if you would like further legal advice on the standards and responsibilities that are required of directors and company secretaries. Our lawyers at You Legal will be happy to assist you in whatever way we can.
* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.