Agenda item

Report of the Director for Legal and Governance

Beth Brown, Head of Legal and Governance, introduced the report focusing on the work undertaken to review the use of Councillors on company boards as a result of the Action Plan produced in response to the Public Interest Report. She highlighted the following points:

(a)  Committee members are invited to provide comments for inclusion in the final review due to go to the Council meeting in January 2021;

(b)  The review proposes a strengthening of the role of the Companies Governance Executive Sub Committee (CGESC) as shareholder, which will allow it more robust controls and a greater degree of influence over the companies strategic and policy objectives;

(c)  The review did not find that there was any prohibition to Councillors sitting on company boards as Directors. Where Councillors do sit as Company Directors it should further the interests and needs of the company and further consideration should be given to the use of independent Directors. Where elected members act as Company Directors they must act in the best interests of that Company;

(d)  Where elected members are on boards they should not participate in any Council decision in relation to the company they are a director of. Consideration is being given to whether members of the CGESC should serve on boards, whether  executive members should sit on boards where they also act as portfolio holder, and whether they should be members of committees where the responsibility of being a Company Director conflicts with being an elected member;

(e)  Appointments to company boards should be made in the best interest of the company, ensuring that the skill set of the Board enhances and promotes the core business of that company;

During discussion the following points were made:

(f)  In the process of the review there has been an emphasis on Councillor training. Officer training also needs to be prioritised, specifically around whistleblowing and raising concerns;

(g)  A further review of Council owned companies should take place into why certain companies exist. The Strategic Director of Finance confirmed that a larger piece of work reviewing all companies was underway in order to create a more robust strategy and financial stability for the companies and for the Council;

(h)  Further information around procurement rules specifically from Council owned companies would be useful for new committee members. Officers confirmed that this would be beneficial and that this training would be included in the Member training programme;

(i)  Four specific points were made and supported by other committee members:

·  Executive Board members should not serve as a member of a Board which comes within their remit as Portfolio Holders.

·  CGESC members should not be members of Company Boards as exempting themselves from discussion would not work as an overall approach to governance given the conflict of interest.

·  The role of the Portfolio Holder needs to be defined in relation to the company within their remit. There needs to be regular meetings with the shareholder representative, Portfolio Holder and the company to allow detailed conversations.

·  There needs to be definition and role of independent members needs along with the function they provide. There is a need for independence in their appointment;

(j)  A change in company boards should not take place too rapidly, as it could be destabilising, however the public, External Auditors and the Ministry of Housing Communities and Local  Government (MHCLG) need to have confidence that changes will be made. Overlap of company appointments and membership of other Committees should also be closely considered. Elected members need to be able to do both roles effectively without conflict of interest arising;

(k)  A good governance framework is the aim of the review and action plan to allow companies to thrive, and drive performance. Board composition should look at aggregate skills to achieve the core business and ensure the right people are on the Board. Companies should provide board members with job specifications. There is a programme of full training for all Company directors in development which includes Induction training for new members and refresher training for existing members;

(l)  The roles of Shareholder and Shareholder Rep need to be very clearly defined. Work is taking place to finalise this distinction, with the Share Holder Rep being the conduit between the Shareholder to the Company. The Shareholder is the Council and the CGESC is the body that manages that responsibility. Shareholder Representatives should not be part of the day to day management of companies. The relationship between Shareholder and Shareholder Rep is achieved through the normal Portfolio Holder briefings;

(m)As part of the response to the MHCLG review work is being undertaken on the Constitution to ensure more robust governance is in place across all decision making;

(n)  The role and appointment of Independent members of Company Boards is a matter for the companies to determine. The CGESC should have oversight of company performance including the skills held by board members and the behaviour of the company towards the Council;

(o)  A Good Governance framework is critical. It is a separate, but linked item to the management of the companies and cultural change to ensure that learning is embedded;

Officers committed to summarising the points made by the committee, and circulating them to Committee members prior to formal submission for Council papers at the end of December.

Resolved to

1)  Approve the following for inclusion in the comments to accompany the report to Council:

·  Executive Board members should not serve as a member of a Board which are overseen by their remit as Portfolio Holders.

·  Members of the Companies Governance Executive Sub Committee should not serve as Directors on any council-owned company (as this Committee directly oversees the activities and performance of all such companies.)

·  The role of the Portfolio Holder needs to be defined in relation to the company within their remit. There needs to be regular meetings with the shareholder representative, Portfolio Holder and the company to allow detailed conversations.

2)  Note the work undertaken so far on the review of the use of Councillors on Company Boards.