11 April 2017
Lorna McMillan, the ICSA Awards Company Secretary of the Year, on balancing the needs of the board and executive team and how governance reform is an opportunity for the company secretary to step up
Lorna McMillan is Company Secretary at CYBG plc
I became Company Secretary of CYBG PLC Group in October 2014, just at the time when our company was starting to prepare for the demerger from its parent, National Australia Bank Limited (NAB), and our IPO.
I have worked with the group for more than 20 years – since I left university – and there has always been a governance aspect to the roles I have held, whether that be coordinating the year 2000 programme for our treasury services function or being responsible for business continuity management when I worked in New Zealand for NAB.
It was only after returning from New Zealand in 2004, and I was thinking about ‘what next’, that I started to consider that a company secretarial career would suit me perfectly. I have always liked being involved in decision-making at the heart of the organisation, but I also appreciated the diversity of responsibilities in the roles I had held.
I was naturally someone who had a very strong attention to detail and was highly organised, but I was also used to working in fast-paced, challenging situations that motivated me. I joined our company secretarial team in 2006, set about getting my professional qualification and have held both Assistant Company Secretary and Deputy Company Secretary roles since then.
I gained my qualification through the self-study route while also having a busy, full-time role. So for me the most difficult aspect was being disciplined about sticking to a formal study plan and managing my time well across work, study and family.
“That is my advice for anyone beginning a career in governance – get as much on-the-job experience as you can”
But looking back, one thing that really helped was being immersed in the practice of what I was studying on a daily basis – when I was reading about effective minute taking one evening, I was at work practising it the next day. And really that is my advice for anyone beginning a career in governance – get as much on-the-job experience as you can. It will help you understand the theory so much better if you can see it come to life in a practical way.
The company secretary is much more than an advisor to the chairman and board and overseer of board administration. Particularly in times of significant business change, the company secretary has a vital role to play in ensuring that the governance framework both supports and enables that change, but also that it ensures business integrity and transparency.
The company secretary therefore needs to balance the needs of the board and executive team and be the influencer – and sometimes enforcer – of good standards of corporate governance. This takes strong EQ, resilience and, often, courage.
The company secretary is required to think strategically and be able to pre-empt issues before they arise and to give objective, impartial advice. Today’s company secretary is as important to the leadership of the business as the board and executive team.
We are still a young PLC and it is challenging to deliver a best-in-class governance framework in the context of significant change externally and internally. Since the IPO, we have done many things for the first time – our first listed company annual report and accounts, and our first AGM for example – so we need to keep learning all the time, focus on continuous improvement and not be complacent.
“What stands the banking industry apart is the public image of the system and perspectives about shortcomings in corporate governance”
Importantly, improving the understanding of the value of strong governance and compliance across the company is an area of focus, to bring corporate governance to life in a meaningful way.
It is easy to say that governance in the banking industry is made more challenging because of a complex and demanding regulatory framework, but there are many regulated industries operating within similar contexts. Perhaps what stands the banking industry apart is the public image of the system and perspectives about shortcomings in corporate governance.
In addition to ensuring a stable financial system through prudential regulation, the conduct of firms in financial services is under increased scrutiny. The Banking Reform Act 2013 introduced a new regulatory framework for individuals, including the Senior Managers Regime (SMR), to ensure that senior managers are held accountable for misconduct within their areas of prescribed responsibility. Alongside this, there are the new Certification Regime and Conduct Rules, which set standards of conduct for individuals at all levels in the banking industry.
The implementation of the SMR has meant our governance frameworks have had to evolve to ensure they are structured to support senior managers to discharge their responsibilities and can evidence they are doing so. This extends to those roles on the board classed as senior management.
Another area of increased scrutiny in the banking industry has been executive remuneration and the notion of reward for failure. This has driven wider recognition of the relationship between remuneration, market integrity and ensuring incentives do not encourage excessive risk-taking or misconduct. The FCA Remuneration Code sets standards to ensure that remuneration policies and practices for firms in the banking industry promote sound and effective risk management. This adds complexity to our remuneration governance framework and the work of our remuneration committee.
Our profession is operating in the context of significant corporate governance reform, political turmoil and uncertainty in the economic environment. Undoubtedly this is a year in which there will be a strong focus on governance, corporate culture and how employee, customer and wider stakeholder voices can shape governance practices.
It is relentless change and it will be challenging for company secretaries to keep on top of it all, but it is at times like these that our role as the advisor, guide and guardian becomes even more important. More broadly, change brings opportunities to look for ways to do things differently and company secretaries can step up, be confident and have their voices heard.
“Change brings opportunities to look for ways to do things differently and company secretaries can step up, be confident and have their voices heard”
The current ‘comply or explain’ approach has set good practice and strengthened decision-making and accountability. However, particularly since the financial crisis, there has been a shift in the emphasis of governance to a much wider set of objectives and expectations, driven by public concern about the way companies are governed, and the need to prevent and sanction poor business conduct.
The action taken by the FRC in recent years – such as the introduction of long-term viability statements, improved risk reporting and greater focus on boardroom diversity – has helped move the current system on, but the purpose of corporate governance has changed, with greater emphasis now on the role of the framework in engendering trust and benefiting a wider stakeholder group.
There are many strengths to the current framework, but we cannot overlook that it has not substantially changed over the past 25 years, while the environment in which businesses now operate, and expectations about good governance, fundamentally have. The FRC’s public consultation later this year on the current UK Corporate Governance Code should be an opportunity to build on the strengths of the current framework, while also addressing how governance, good board behaviour and stewardship can earn back stakeholder trust and confidence.
For a full list of the 2016 award winners and photos from the evening, visit the ICSA website