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The role of the company secretary in building an ethical culture - Coggle…
The role of the company secretary in building an ethical culture
A company needs to embed the code within the organisations business behaviours and practices
The Chair of the FRC said a healthy culture both protects and generates value. It is therefore important to have a continuous focus on culture, rather than wait for a crisis
Culture is an accepted way of doing things around a company. Every organisation has a culture. A culture happens either by design or deafult
The Code requires the board to monitor culture and take corrective action is culture is not what was anticipated by the company's value or code of ethics
The CS has a role to play in assisting the board to establish and maintain an ethical culture by
Suggesting that discussions about corporate culture are on the board's agenda
Suggesting that culture indicators are selected based on the expectations of the organisation''s key stakehodlers
Developing a dashboard for the culture indicators that should be reviewed from time to time by the board
Ensuring that information is drawn from a variety of sources to support and monitor perceptions of performance for the selected indicators
Organising site visits so that members of the board can get out and about and meet employees to assess for themselves the culture embedded within the organisation
Assisting in developing the reporting to stakeholders on the organisations culture
May work with the HR function to organise training sessions on ethics and other aspects of culture creation
Top 10 culture indicators
Speak up and whistleblowing data
Results of employee surveys
Taxation policy
Diversity
Regulatory infringements
Health and safety record
Financial indicators
Customer satisfaction data
Engagement with charities
Code of ethics sign off rate
Speaking out against bad governance and unethical behaviour
The CS is often known as the conscience of the company due to their governance role. They have a direct role in liaising with the board and/or management to ensure that the board and / or company carry out the organisations operations according to the values set by the orgnaisation
The CS should speak out against bad governance and unethical practices, and remind the board and senior executives of the appropriate course of conduct and principles of good governance that they should apply to protect the reputation of the organisation and ensure that the company is sustainable in the long term
Company secretaries have a responsibility to ensure that the organisations they work for 'do the right thing' often this may be going beyond what is required in law
Traditionally ethics was often described as the grey area between the law and the realities of acceptable behaviour. Today many ethicists prefer to see ethics as legal activities that are interpreted according to the values of the company or individual
The CS have to develop skills, policies and procedures to ensure that they are able to test the acceptability of a certain court of action to external stakeholders and advise the board and management accordingly of the impact on the organisation of implementing the decision they are about to make
This is not always easy but by engaging with stakeholders, listening to their opinions and views and enlightening the board and senior management to legitimate concerns and interest of key stakeholder groups a company secretary should be able to carry out this role
Ensuring that the board set standards of ethical business
One of the key roles of the board is to set standards of ethical behaviour that it and the owners of the company expect the board and all the company's employees to follow
This entails creating ethical values and principles for the company. The CS is often asked by the board to work with senior management to develop the ethical values of the company
Ethical principles are statements that
Provide guidance and direction for behaviour
Relate to issues such as fairness, equity and justice
Are universal
Set boundaries that should be respected
Ethical values
Shape the context in which the ethical principles are implemented
Guide choices made by the board, management and other employees
Frame norms of behaviour within the organisation applied to daily decisions
Are incorporated into the organisational culture
The CS should advise the board and senior management to select ethical values for the company that are appropriate to that company
To achieve this best practice is to develop ethical values and standards of behaviour from the bottom up
Employees should be asked for their opinions and the values and standards of behaviour should be devloped including their input
CS/GP should be wary of plucking values from the Internet with little thought and plastering them on the walls of the company. Employees and often the board struggle to associate with them and in many cases to even remember them
Being able to embed within a company its ethical values is very important to the success of the company
CS/GP should be careful when choosing integrity as a value, in itself integrity does not have a meaning. It needs to be combined with other values. It is an assurance that the values will be lived up to as integrity means we will do what we say we will do.
When choosing integrity as a value, many associate their own values with it and so assume that it means being honest, truthful etc.
Developing a code of ethics
The CS ifs often asked by the board to develop a code of ethics
When drafting the code of ethics, the company should avoid recommending the adoption of someone else's code
Every company is different and has different ethical issues to deal with
Time should be taken to develop a code specifically for the company
Once a code has been drafted, the CS should take time to consult with employees on the draft code and share feedback with the board
The board would then approve the code which should then be piloted for about 6 months to ensure that it is appropriate for the organisation
The CS should work with HR and internal audit functions to pilot the code, collect input from employees, give feedback to the board on the success of the pilot and suggest amendments that arise from the pilot - this is to ensure buy-in by employees
The CS should work with the HR function to roll ou the code throughout the company. This will include posters, workshops and information on the company's intranet site
Once the code is operational the CS should work with the internal audit function to monitor compliance with the code, the board should have established a whistleblowing policy and procedure so that any breaches of the code can be reported to the board via the audit commiteee
Once the revised code has been approved by the board, with the help of the HR function, the changes should be communicated to the employees
Amendments to the code should only be made when absolutely necessary as constant changes will confuse employees
Contents of a code of ehtics
Company values
Company ethical principles - honest
Company ethical standards towards, employees, customers, suppliers and other business partners, government and community, society and the environment
Implementation of the code
Statement of responsibility for complying with the code
Means to obtain advice
Training
Communicating the expected standards of ethical behaviour
It is important for companies to indicate to the board and its employees the standards of behaviour expected because as with individuals, each company will have its own ethical value and standards of behaviour
To honour these values, those connected with the company need to know what the values are and how the company expects them to act in certain circumstances.
Sometimes the approach to governance adopted by the company can influence the expected action. For example if the company has a shareholder approach to corporate governance, its values may indicate that it puts the interests of shareholders ahead of the interests of anyone else. If the company adopts a stakeholder approach, its values may indicate that the board and ts employees should take into consideration the needs and concerns of a wider stakeholder group than just shareholders.
These indications will result in different behaviours. When disseminating the values, the CS should ensure that the reason why the value is so important for the company is also communicated. This will help employees identify with the importance of living up to the value
Alterting the board and management to the professional ethical standards of advisors and others
CS/GP should be aware of any professional standards of people within the company or those dealing with it and they should ensure that the bard and management are altered to them when developing the company's standards
This is to ensure that the company does not develop standards that are contradictory to the professional standards
Ensuring that compliance with the values and the code of ethics is monitored and breaches are reported to the board
The CS should ensure that management and internal audit are monitoring compliance with the values and code of ethics
Any breaches should be reported to the board via the audit committee
The CS should review the breaches and advise the board on whether changes are needed to the values and/or code of ethics
Ensuring that ethical values and the code of ethics are reviewed from time to time
A good CS will also be aware that ethical values change over time
This can often be detected from the types of issues that are raised through the whistleblowing proceudre, reported in the press and received in information from professional bodies and advisers.
At least annually, the CS should review the company's values and standards of behaviour and propose amendments to the value and code of ethics where necessary to the board
Ensuring that the board approves and monitors implementation of whistleblowing policies and procedures
To assist boards in monitoring adherence to code of ethics, many companies adopt whistleblowing policies.
CS/GP often get involved in drafting these policies and working with either internal audit or the HR function to implement them