....the Central Bank’s revised Corporate Governance Code coming into effect and substantial changes relating to the appointment process to State boards.
The Companies Act 2014, which was signed into law in December 2014, introduces sweeping changes to company law and will replace the existing Companies Acts 1963-2013. The Act is expected to take effect in June 2015 and will have far reaching implications for every Irish company, its directors and shareholders.
The onus is on company directors to ensure that they understand the key reforms implemented in the Act, including the various company types, the process and timeframe for migration of existing companies, where applicable, and the implications for directors in discharging their duties under the Act.
While the transition period will be in place for up to 18 months, it is imperative for companies to now consider the impact of the new legislation for their organisation and to plan accordingly. Companies should keep up-to-date with the vast amount of information available from professional services firms, representative bodies such as the Institute of Directors in Ireland and the Companies Registration Office (CRO), so as to be as prepared as possible for the significant changes to come.
Further governance reforms have also been added to those already in place in the financial services sector. The revised Corporate Governance Code for Credit Institutions and Insurance Undertakings is now effective and places a greater emphasis on risk at executive and board level. Among some of the revisions is a requirement for institutions to appoint a Chief Risk Officer (CRO) and for both the audit and risk committees to have a minimum of three members, with the requirement for at least one shared member across both committees.
The revised Code also introduces changes in relation to the frequency of board meetings, the introduction of a diversity policy for board membership and provisions for both the Chairman and CEO to hold additional roles, in particular circumstances.
In addition to the governance regulation in place for credit institutions and insurance undertakings, the Central Bank also recently consulted widely on fund management effectiveness, and this may lead to changes in the governance structures and oversight of these companies.
In the public sector, the long-awaited new guidelines for appointments to State boards have been introduced with the aim of increasing transparency in the process and creating a level playing field for applicants. All applications will now be dealt with through a dedicated website, www.stateboards.ie, which is managed by the Public Appointments Service.
The appointment process to State boards has been shrouded in controversy for many years and while the new system is a work in progress, it is hoped that it will help to build confidence and transparency, while ensuring that the best people with the most relevant skills and expertise are appointed.
A key outcome of the significant regulatory and legislative governance changes in recent years has been greater recognition on the part of directors of the need to keep fully up-to-date with their legal and fiduciary responsibilities. Significant steps have been taken across a range of sectors to strengthen the governance structures of companies operating in Ireland and reflect the new environment in which boards and directors now operate. Rather than being burdensome, good corporate governance should be viewed as a tool to enhance the business, to increase oversight and to lead to increased board effectiveness.
We must all demand high standards of corporate governance in Ireland, and directors and boards must respond to this.
As our economy grows, it is imperative that the governance lessons learnt in some sectors in recent years are not left behind but rather that good governance forms part of the fabric of all businesses operating in Ireland.
By Maura Quinn, Chief Executive, Institute of Directors in Ireland.
