ICSA Isle of Man Conference 2017, 10 May

The ICSA Isle of Man Conference 2017

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The UK Government’s review of
corporate governance
Chris Hodge
Policy Advisor, ICSA
10 May 2017, Isle of Man

Who’s doing what?
• The UK Government has consulted on the need for reform to the
corporate governance framework, and commissioned a series of reports
on diversity.
• The House of Commons Select Committee published its
recommendations to the Government in March.
• The FRC plans a “comprehensive review” of the UK Corporate
Governance Code, and is bidding for new legal powers to monitor the
entire annual report and accounts and to impose sanctions on all
directors for financial reporting breaches and “associated issues of
integrity”.
• The FCA plans to extend the SM&CR regime to all regulated firms, and
is considering a “governance light” listing segment for international
companies

Purpose of the Government review
“For people to retain faith in capitalism and free markets, big business must
earn and keep the trust and confidence of their customers, employees and
the wider public… It is clear that in recent years the behaviour of a limited
few has damaged the reputation of the many. It is clear that something has
to change.”
“The UK is already an established leader in corporate governance – one
reason why we are an attractive destination and a great place to invest and
do business. We want to retain and extend that leadership and support
companies to take better decisions, for their own long-term benefit and that
of the economy overall”.
Theresa May, in the introduction to the Green Paper

Three specific objectives
• Ensuring that executive pay is properly aligned to long-term
performance.
• Giving greater voice to employees and consumers in the boardroom.
• Raising the bar for governance standards in the largest privately-held
companies.
Each objective is seen as being “about competitiveness, and creating the
right conditions for investment, as much as they are issues about fairness”.

Executive remuneration: options (1)
• Some or all of the pay package to be made subject to a binding vote
(i.e. the annual remuneration report as well as the remuneration policy),
with variations on that theme, such as:
• Stronger consequences for losing the advisory vote.
• More frequent binding vote on the policy.
• Other ways of enhancing shareholder involvement, such as shareholder
committees, mobilising retail shareholders, and/or requiring
remuneration committees to consult shareholders (and others)

Executive remuneration: options (2)
• More pressure on institutional investors as the “enforcers” – for
example, by requiring them to disclose their voting record.
• More disclosure on pay, for example: CEO/ workforce pay ratio; and/or
more detail on the performance targets that trigger bonus payments.
• Restrictions on holding periods for share options (suggested minimum
of five years).
• Remuneration committee chairs to have had previous experience on a
committee.

Greater voice: options
• The Green Paper hints that there will not be any mandatory structures
imposed on companies, but identifies a number of approaches
including:
• Worker and other “representatives” on company boards.
• “Designated NEDs” to bring stakeholder considerations to board
discussions.
• Stakeholder advisory panels.
• More reporting on how the views of, and impact on, stakeholders have
been taken into account; possibly by reporting on how the directors’
duties in S172 of the Companies Act 2006 have been applied.

Greater voice: ICSA/IA guidance
• The guidance will be addressed to all companies, and will cover:
• Stakeholder identification
• Board composition, induction and training
• Board and committee responsibilities
• Engagement mechanisms
• Reporting and feedback
• Hope to publish the guidance by the end of June 2017.

Private companies
• The Green Paper argues that large private companies, whose activities
can have a significant public impact, should be expected to apply high
standards of governance. The challenge is how to make that happen:
• Which standards should they be expected to meet? And should they
report on how they have done so?
• Is a voluntary approach sufficient in the absence of external
shareholders to apply pressure?
• If regulation is used, who does it apply to and how is it enforced?
• No reference to sanctions in the Green Paper

What happens next?
• Everything is on hold until after the General Election. But in the event of
a Conservative victory we might see:
• Additional regulation and/or Code amendments on executive
remuneration;
• New requirements to report on how directors’ duties have been
applied (possibly to be enforced by the FRC);
• Those requirements extended to large private companies, with a
Government/ FRC endorsed voluntary code for those companies;
• A revised UK Corporate Governance Code in 2018, with more on
corporate culture, diversity and stakeholder engagement.

Minute taking
Peter Swabey, FCIS,
Policy & Research Director, ICSA
10th May 2017 – ICSA Isle of Man Conference

The minuting of meetings
Consultation published 23rd May – closed 24th June
89 responses to 31 questions
2,759 answers
Summary of feedback now published on www.icsa.org.uk/minutetaking

So what did we find ?
• Good minuting is a deceptively difficult and time consuming task
which is often under-valued, notably by directors. It is far more than
an administrative formality
• An enormous variety of minute taking practices
• Many people are absolutely convinced that they take minutes ‘the
right way’
BUT…..

So what did we find ?
There is no one-size fits all approach for minute-
writing and no ‘right way’ to draft minutes
• Context is always important and each chairman and each board will
have their own preference for minuting style
• It is up to each individual organisation to decide how best its
meetings should be recorded

What are minutes for?
• The purpose of minutes is to provide an accurate, impartial and
balanced internal record of the business transacted at a meeting
• Minutes should document the reasons for the decision and include
sufficient background information for future reference – or, perhaps,
for someone not at the meeting to understand why the board has
taken the decision that it has.
‘to record key points of discussion, record decisions and the reasons
for decisions, and agreed actions’
‘accurate’, ‘impartial’ ‘balanced’ ‘to demonstrate challenge’

In simple terms, their purpose is to record what
was done, not what was said but with sufficient
context to give assurance that it was done
properly

‘They should be the single source of truth, and should be a complete, self-standing record
(together with the papers). They should act as evidence of the meeting and as a record of
those matters discussed/noted, concerns raised, decisions made and, where considered
helpful, the rationale for those decisions, and demonstrate the directors acting in accordance
with their duties under the Companies Act.’
Sectoral variation:
• A charity or public sector organisation may focus more on ensuring there
is clear accountability visible through the minutes
• A regulated financial services company is more likely to focus on
providing evidence of robust decision making.

Who is responsible for the minutes?
• The Company Secretary … or other governance professional is
responsible to the chairman for the preparation and retention of
minutes
• The chairman and the other members of the board are responsible
for confirming their accuracy
• The person taking minutes should be properly qualified to do so – i.e.
they should have the necessary knowledge and skills
• Too often minuting a meeting is left (at short notice) to a junior
member of staff without the appropriate experience or training

Key skills of a good minute taker include being able to:
• listen to multiple voices at the same time and capture both their
arguments and tone
• summarise an argument accurately and record decisions taken and
action points on which to follow up
• identify which parts of the discussion are material and should be
recorded
• have the confidence to stand firm when someone asks them to
deviate from what they believe to be an accurate record
• have the confidence to ask for clarification

• Wherever possible, the company secretary should be supported at
the meeting by a suitably skilled minute taker if one with the
necessary skills is available
• It is generally a good idea for the company secretary to discuss with
the chairman before the meeting any relevant procedural issues
and, perhaps most importantly, how they can best support the
chairman

• It can take at least as long, often twice as long, to draft minutes as the
meeting itself took
• It may be helpful to develop a minute taking policy or style guide to set
the house style and conventions. This could be approved by the board
• Minutes are normally written in ‘reported speech’ style; they should not
be a verbatim record of the meeting
• The minutes should be clear, concise and free from any ambiguity as
they will serve as a source of contemporaneous evidence in any
judicial or regulatory proceedings
Drafting minutes

Drafting minutes – preliminary information
• The infrastructure of the meeting
• Who, where, when, what, how etc
• Quorum
• Directors’ duties
• Conflicts of interest
‘These items are not legal boilerplate and are important. The wording of
the guidance should be revised.’

Quorum
• A matter for each individual organisation
• Probably only need be mentioned if there were a lot of
absences, or a high quorum requirement such that there might
be doubt
• For example, if one or more directors have to absent themselves owing to a
conflict of interest
• Of course, if the chairman does mention quorum it should be
minuted
• It is the responsibility of the company secretary to be aware
whether the meeting is quorate at all times, and advise the
chairman should this not be the case

Conflict of interests
• Legal, regulatory and constitutional requirements must be observed
• Unless the sectoral regulator requires otherwise, it is reasonable only
to refer to conflicts of interest in the minutes where:
• the chairman or another board member raises the issue, which they might do if there is
a perceived risk of a conflict arising
• a potential or actual conflict of interest is declared by one or more of those present
• a conflicts register is circulated, tabled or reviewed as part of the business of the
meeting
• it is necessary to amend the conflicts register.

Drafting minutes – level of detail
• The degree of detail recorded will depend to a large extent on:
• the needs of the organization
• the sector in which it operates and the requirements of any regulator
• the working practices of the chairman, the board and the company secretary.
• As a minimum, however, we would expect minutes to include:
• the key points of discussion
• decisions made and, where appropriate, the reasons for them
• agreed actions, including a record of any delegated authority to act on behalf
of the company

Drafting minutes – naming names
• Individual contributions should not normally be attributed by name, but this
will be appropriate in some cases. Practice is changing in this area,
particularly in the corporate sector
• Demonstrate individual director participation and challenge
• Equally it became clear that the charity and public sectors have very
different practice whereby individual contributions are often attributed.
• Once again this is a matter for individual organisations
• Guidance includes suggestions on where it will usually or may be
appropriate

Drafting minutes – dissent
• Most board decisions are reached by consensus
• However, in exceptional circumstances, where the whole board cannot
reach agreement, individual directors may request that their dissenting view
be recorded in the minutes. It is normal to comply with such requests
• The question of how dissent is recorded will be a matter of organisational
preference.
• One suggestion for specimen wording might be:
‘There was a robust discussion about x, with considerable challenge around
a, b, c and d. The board agreed to y, with Mr z requesting that his dissent
be recorded.’

Drafting minutes – other matters
• If board papers are received for noting and no decision is
required, then unless there is material discussion that needs to
be recorded, minutes should indicate that the relevant report
was ‘received (or reviewed, if that is what happened) and its
contents noted’
• Conflicts of interest
• Legal professional privilege
• Offshore companies
• “not for the minutes”

Drafting minutes – the regulator
• Minutes are increasingly used to demonstrate that the directors have
fulfilled their statutory duties
• evidencing appropriate challenge in order to hold the executive to account
• showing that issues of risk and both shareholder and stakeholder impact have
been properly considered
• Minutes should facilitate regulatory oversight, but this is not their primary
purpose
• Nonetheless, those drafting minutes should be mindful of regulatory needs
• The well-written minutes of an effective board meeting should convey all
the assurance that a regulator requires

Review and approval of draft minutes
• Draft minutes should be clearly marked as such and amendments to the
draft minutes should be thought of as ‘enhancements’ rather than
‘corrections’
“Editing by board members who are ultimately responsible for the
accuracy should not be regarded as a failing on the part of the person
drafting the minutes but a sign that responsibilities are understood and
taken seriously.”
• Need to guard against attempts to rewrite history
• The audio recording of board meetings or the publication of board
minutes is not, generally, recommended
• Treatment of ‘post-meeting events’
• To redact or not to redact …..

Access to the minutes
• Who – auditors, regulators and other third parties
• For example, as a board responsibility, minutes should be included
as part of the board evaluation process
• What – unrestricted / restricted (e.g. senior audit partner) / view-only /
redacted
• How – electronically / minute book / electronic portal
• Publication of minutes
• Retention of minutes

Company secretary’s notes
• Great care should be taken with the company secretary’s notes of the
meeting, both in terms of content and retention. We recommend that
they are destroyed once the minutes to which they relate have been
approved
• Wide variety of practices
• Retention periods ranged from as soon as they were written up to
pretty much forever
‘only one version of the truth is required’

Conclusion
• A very interesting and rewarding process
• 89 responses to a consultation – isn’t it great that there are so many
people with such strongly held views?
• All this may suggest that minute taking is a necessary yet thankless
task, but as one respondent to our consultation asked, how many
other people in an organisation get their work in front of the board as
frequently and consistently as company secretaries?
• Thanks to everyone who shared with us their wisdom and experience
gained from minuting literally countless meetings and, in particular, to
Colin Passmore at Simmons & Simmons and Carol Shutkever at
Herbert Smith Freehills for their guidance and support.

Further information
www.icsa.org.uk/minutetaking

Dennis Tourish
Professor of Leadership
Sussex University
Co-editor of ‘Leadership’
Email:
D.J.Tourish@sussex.ac.uk
DYSFUNCTIONAL LEADERSHIP
IN CORPORATIONS
Ken Lay
AKA ‘Kenny Boy’
Jeffrey Skilling

Amazon April 2017 -180,007 books with ‘Leadership’ in their
title. If you read one every day including weekends it would
take you 493 years….
BUT – there are only
168 books with
‘Followership’ in their
title
We have a fixation on
leadership, though
without followers there
are no leaders…

SOME ASSUMPTIONS
• Followers should
conform – mostly, do
what they are told
• Leaders know best
(but do they always?)
• Dissent is resistance to
be overcome
Who’s the
boss
BBC 2
March
2016

KEY LEADERSHIP INSIGHT
The norm of
reciprocity
‘I’m not going to Ted’s funeral.
He won’t be coming to mine.’

WHAT ABOUT TRUST?
• Survey of 33,000 people in 28
countries
• CEO credibility dropped worldwide,
by 12% from previous year
• At an all time low of 37% who say
CEOs are ‘credible’
Edelman Trust Survey, 2017

‘You’re an evil bastard, Gilroy. I like that.’

A MAJOR SOURCE
OF ERROR???
‘The temptation to tell a
Chief in a great position
the things he most likes
to hear is one of the
commonest explanations
of mistaken policy. Thus
the outlook of the leader
on whose decision fateful
events depend is usually
far more sanguine than
the brutal facts admit.’
Winston Churchill (1931)
INGRATIATION...

EFFECTS OF FLATTERY
• A study of 451 CEOs looked at the impact on them of more
intense and frequent flattery (e.g., offering exaggerated
compliments) and opinion conformity (e.g., expression of
agreement even when people don't agree).
• Flattery and opinion conformity linked
to CEOs having more favourable
evaluations of their own strategic
judgments and leadership skills, being
less likely to make strategic changes
when firm performance suffered, and
more prone to lead firms that suffered
persistently poor performance.
Hyuan Park, Westphal and Stern, ASQ,
2011

EFFECTS OF NARCISSISM
• Highly narcissistic CEOs less responsive to
whether recent firm performance was good or
bad - continued to make equally risky
investments (e.g. acquisitions of new companies)
regardless of recent performance. Their less
narcissistic peers more cautious in bad times and
tended to take bigger risks during good times.
Chatterjee and Hambrick, ASQ, 2011

IRRATIONAL BIAS–
ILLUSORY SUPERIORITY
• 69% of drivers consciously worry about being
killed when driving
• Only 1% believe they drive worse than average
• 98% think they are safer than, or as safe, as the
average driver.
Brake (Road Safety Charity) Survey of 800 UK
adults, March 2011

MEA CULPA
• More than 90% of professors think
they are in the top half of their
profession!
Trivers, 2011

People are especially sensitive to negative
input – the ‘automatic vigilance effect’
Which
of these
movies
would
you
prefer
to see?

HOW WE TREAT
CRITICAL FEEDBACK
• Subjecting critical
feedback to criticism/
accepting positive
feedback
• ‘I DON’T BELIEVE IT’
• Deny failure
• Alternative
facts??

WHAT CAN BE DONE?
• Seek out formal and informal
contact with people as often as
possible

WHAT CAN BE DONE?
• Scrutinise positive
feedback more rigorously
than negative feedback
• Institutionalise dissent
into the decision-making
process – e.g. promote/
cherish/ reward
contrarians
• Create a culture that
confronts ‘the brutal facts
of reality’ – i.e. where the
truth is heard

A CLIMATE WHERE THE
TRUTH IS HEARD
Lead with questions,
not answers
Practice saying:
• ‘I don’t know’
• ‘What do you think?’
• ‘Where have we gone wrong?’
• ‘What could we do better?’

A CLIMATE WHERE THE
TRUTH IS HEARD
Engage in debate, not coercion
• Have chaotic meetings
• Loud debate
• Heated discussions
• Healthy conflict
D.J.Tourish@sussex.ac.uk

© themindfulbusiness.co.uk 2017
a mindful business
slowing down to speed up
Dr Dina Gray

designing mindful organisations
3.5
3.6
3.7
3.8
3.9
4
1 2
Wave 1
Wave 2
The 10 principles

why mindfulness?

absent minds
Killingsworth & Gilbert, 2010. A wandering mind is an unhappy mind. Science, 330(6006).

the one word check-in

in touch with the real world?

#1 pay attention to the here and now
1. Look straight ahead
– no head movement
2. What do you notice?
3. How many things had you not seen
before?

going fast…

going fast in business…

going fast by multi-tasking
1. Write out the 26 letters of the alphabet
2. Then write out the numbers 1 to 26
3. Now write out alternatively
A, then 1, then B, then 2 e.t.c.

slowing down…

slowing down in business…

what is mindfulness?

mindfulness = creating space
Stimulus (Re)Action

write down the first word
that comes to your mind

now write down
other thoughts
about the picture

generating space = focusing attention
#2 Noticing the automatic

coming to our senses

1. Discuss with your neighbour …
what did you notice?
#2 Noticing the automatic

why focus on the 5 senses?

what we’re not

today’s reality

need to slow down in
organisations

mindfulness for co. secretaries
Exercising personal discretion as an independent mindset
• Personal situational awareness and perspective
• Able to observe, reflect and feedback
• Critical self-reflection
• Emotional intelligence
• Rational
• Pragmatic
• Non-emotional
“The Company Secretary. Building Trust Through Governance”
Andrew Kakabadse 2016

mindfulness for co. secretaries
Interpret the behaviour of others and know how to deal with it
• Sense of inquiry
• Listening
• Empathy
• Intuitive
• Find the space to think
• Social awareness
• Soft social skills
• Able to ask tough questions
• Able to read people
• Be objective
“The Company Secretary. Building Trust Through Governance”
Andrew Kakabadse 2016

one possibility…

becoming a mindful organisation
• Beyond individuals and leaders practicing mindfulness
• Leaders need to
• 1. Notice where the organisation runs on autopilot
• 2. Embed processes that promote open-mindedness
• Self-care to create mental space is essential at all levels
• Paying attention to context is key
“Culture eats [your mindfulness] strategy for breakfast”
Peter Drucker

mindfulness = mental exercise

reflection for you:
1. where can you generate space?
2. how can you become a mindful organisation
1st Step: paying attention
2nd Step: increasing awareness
3. take away 1 practical action

Email: dina@themindfulbusiness.co.uk
@juttko http://www.huffingtonpost.co.uk/jutta-tobias/
Thank you!
please use OUR free materials
& we are here to help
the 10 principles

ICSA
Sefton Hotel – 10 May 2017
Paul Heckles, AML/CFT Advisor, Cabinet Office

MONEYVAL EVALUATION
Will cover:
 What it is
 What it entailed
 What were the results
 What happens next
 What this means for industry
 Questions

MONEYVAL Review
 MONEYVAL - a Committee of the Council of
Europe and a FATF Style Regional Body
 The IOM joined MONEYVAL in 2012 for the
purpose of mutual AML/CFT assessment
 Our last evaluation in 2008 was under the old
FATF standards, by the IMF
 The new 5th round evaluation was against the
2012 standards and included both ‘Technical’
and ‘Effectiveness’ assessments

 Began in autumn 2015 – published in December 2017
 On-site interviews with authorities and industry in
April 2016 (selected by MONEYVAL)
 8 Banks, 7 TCSPs, 7 Insurance , 5 Online gambling 5
Securities, 4 Lawyers, 6 Other and 10 Industry
organisations and numerous meetings with
government departments.
 68% on-site meetings were with industry
 3 detailed draft reports
 Face to face meeting in October 2016
 MONEYVAL Plenary 8 December 2016
MONEYVAL Assessment Process

Mutual Evaluation Report - Summary
 MER in 2 parts - Effectiveness Report and a Technical
Compliance Report
 61 Recommended Actions (16 Priority) and 155
Technical matters requiring consideration
 Robust but acknowledges strengths in IOM regime
 Technical compliance strong
 Areas for significant or fundamental attention mostly
identified by our National Risk Assessment
 IOM reports back to MONEYVAL on progress in
April/May 2018

 The Technical Report notes improvements
since IMF in 2008
 Strong report against the 40 FATF
Recommendations
 Only 5 Recommendations rated as ‘Partially
Compliant’
 Measures already in place to address these
Technical Compliance Report

Technical Compliance Report
The “Partially Compliant Ones”
 Recommendation 16 – wire transfers
 Recommendation 23 – DNFBPs
 Recommendation 24 – beneficial ownership –
legal persons
 Recommendation 25 – beneficial ownership –
legal arrangements
 Recommendation 35 - sanctions

Effectiveness Compliance Report

Follow-Up Reports
 Regular and Enhanced Follow-Up processes
 The IOM is in Enhanced Follow-Up
 Report to be submitted to MONEYVAL in
February 2018 ready for their April/May Plenary
 Plenary will consider progress made
 The IOM can request move to Regular Follow-
Up process
 Review of Technical Ratings can be requested –
must be submitted 6 months in advance

Jurisdictional Comparison
 New 5th round is very challenging
 Problems are mainly Effectiveness issues but some
jurisdictions have struggled with Technical as well
 To date 30 countries worldwide have been assessed
 28 are in enhanced follow-up procedures
 Includes the US, Switzerland, Australia, Canada,
Belgium, Singapore, Austria and Norway
 Enhanced follow-up is the new norm
 UK evaluation begins later this year

Government Response
 Measures established (e.g. FIU and Asset
Recovery Unit) or in hand (e.g. wire transfers)
 Some actions originated from the NRA
 Commitment set out in Programme for
Government 2016-2021
 Chief Minister recently stated in the HoKs that
responding to the MER was a matter of national
priority.
 Report is being considered and prioritised
 National Strategy being revised and authorities
have an action plan
 NRA will be revised and updated

Implications for Industry
 Significant work falls to Government
 Some policy development required
 Some legislation already planned e.g. Beneficial
Ownership and AML Gambling Bill
 Other limited changes and amended guidance but
will not be raft of new legislation
 Consultation and co-operation will be key feature
 We are not under pressure to prosecute – we need
quality cases not quantity
 Up to the IOM to determine how to deliver
improvements

Questions
Contacts:
Karen Ramsay, Head of AML/CFT Policy Office
karen.ramsay@gov.im
Paul Heckles, AML/CFT Advisor
paul.heckles@gov.im
Joanne Hetherington, AML/CFT Manager
joanne.hetherington@gov.im

A BRAVE NEW WORLD – THE FUTURE OF WORK IN THE
DIGITAL AGE
Employment Law Issues Arising from Social Media and Working in the Digital Age.

THE DIGITAL AGE
Customers and employees – expect a simple, fast and
streamlined experience from the organisations and people they
interact with in their jobs and daily lives.
For organisations, the key to succeeding in the digital age is not
just about technology.
As well as developing clear digital strategies, it’s about
understanding how the workplace is changing and becoming
increasingly mobile.
9 May, 2017
A Brave New World – The Future of Work in the Digital Age108

BENEFITS OF A MODERN DIGITALLY FOCUSSED BUSINESS
 Information sharing - Digital transformation can help give people good
data to make better decisions and collaborate more effectively with
colleagues. It also
 means that employees can have access to the right information quickly
 to share with customers and colleagues
 Customer Focus - Thanks to smart devices, tasks that touch the
customer don’t have to be performed in an anonymous back office –
employees can deal right in front of the customer.
 „„
 Talent management - Digital transformation can help make a company
more attractive to work for, and empower an effective workforce. To
serve customers and attract the best talent, organisations will need to
become flexible workplaces – and make sure they are up to date with
what employees want.
9 May, 2017

A VISION FOR THE MODERN WORKFORCE
Agile Working: Agile Working uses information technology to
enable people to work without the traditional limitations of where
and when tasks must be performed to optimise their
performance and deliver ‘best in class’ value and customer
service.
Mobile Working: Mobile working uses information technology to
enable people to work away from their regular place of work,
whilst retaining a physical base/desk to work within the
geographical footprint.
Flexible Working: Flexible working is a way of working that suits
an employee’s needs e.g.; having flexible start and finish times,
part –time employment.
9 May, 2017

RELEVANCE OF SOCIAL MEDIA TO WORK PLACE
Why is it relevant to employment law and the workplace?
-People use social media in both a personal and business
context (in office hours and out of office hours) and it is this
overlap which can create difficulties;
-Employees/ workers need to know where lines are drawn;
-Employers need to be clear about what rules they have
regarding social media;
09 May 2017

POSITIVES
Can be an effective business tool for presenting a positive image
of the Company.
An efficient way of sharing information, knowledge and best
practice, use of branded pages, promotions/contests.
Networking opportunities – business development.
Gathering information about candidates for recruitment.
Platform for promotions.
Customer Service and feedback.
Responding to rumours and negative publicity.
Increasing the company’s profile and reputation – use of branded
pages.
09 May 2017

EMPLOYEE’S USE OF SOCIAL MEDIA - RISKS
Can be devastating to a Company if an employee misuses social
media.
Law is almost devoid of any useful guidance for companies. No
statute or applicable regulations that set out guidance for
companies to follow.
Instead employers must rely on basic principles related to
employee privacy, employment law, anti-discrimination and
harassment law, intellectual property law, defamation and
common law principles concerning breach of trust and
confidence.
09 May 2017

OTHER RISKS TO MANAGE
Loss of productivity – excessive use of social media during
working hours can detract from day-to-day duties;
Misconduct – behaviour at work and outside of work;
Posting of Inappropriate Statements:
- whether at work or in an employee’s own time
employment claim (“vicarious liability”);
- defamation;
- harassment;
- Breach of copyright;
- Freedom of expression v commercial interests of the
Company
09 May 2017

FURTHER ISSUES TO CONSIDER
Breach of Confidentiality/ Disclosure of Proprietary Information:
- where an employee deliberately or inadvertently posts
confidential information about the employer or the
employer’s clients on a social networking site
- could violate confidentiality agreements, cause the
company to lose protections of its intellectual property
rights, waive privilege and violate securities laws
Employee Competition
- employee’s contacts and client details – risks solicitation
of customers/ clients.
- Tailor restrictive covenants accordingly
09 May 2017

VICARIOUS LIABILITY
An employer is vicariously liable for the acts of its employees
where the occur “in the course of employment”.
Sidhu v Aerospace Composite Technology Ltd – an offsite “family
fun day” arranged by the employer and to which staff were
accompanied by family and friends not considered to be an
extension of the workplace.
In a social media context, would expect an employment tribunal
to adopt a broad approach in relation to comments directed at
specific employees on a social media site, particularly if those
comments relate to conduct in the workplace.
09 May 2017

DATA PROTECTION ISSUES
 Recruitment – employers increasingly advertising vacancies on social
media. This advert should explain how the data is being collected, used
and stored.
 Screening – it is lawful to screen candidates provided it is in accordance
with the Data Protection Act and any data collated for the recruitment
should not be used for any other purpose. Preferable to inform
candidates that screening may include publically accessible information
on social media websites.
 Discrimination – any data collated during recruitment should not be
used in a discriminatory way.
 Use of Client’s Data/ TP Data – must be made clear to employees that
information should not be broadcast on social media without the
consent of the individual.
9 May, 2017

CASE STUDIES – DEROGATORY COMMENTS
Derogatory Comments About Workplace:
British Waterways Board v Smith UKEAT 0004/15
Comments made on Facebook. Dismissal was fair – fact that
misconduct had taken place 2 years before dismissal did not
matter.
Offensive Comments Unrelated to Work:
Anwar v LHR Airports Ltd ET/2700839/14
Monroe v Katie Hopkins (2017)
09 May 2017

CASE STUDIES: BRINGING THE EMPLOYER INTO DISREPUTE
Bringing the Employer into Disrepute:
Mazur v Crediton Dairy Ltd ET140095/2014 – employee posted
an inappropriate photo on facebook. Dismissal was unfair and
wrongful. No grounds to conclude that the employer had been
brought into disrepute. Award reduced for contributory
conduct.
Offensive Personal Tweets:
Game Retail Ltd v Laws UKEAT/0188/14 – confirmed social
media misuse was fact dependent.
09 May 2017

EMERGING LEGAL ISSUES
Trust and confidence
- where an employee highlights on-line his interest in
pursuing career opportunities elsewhere
Ownership of social media
- employees’ online “brand” – personal or commercial?
- who owns LinkedIn connections and/or Twitter followers?
Who owns a LinkedIn Group?
- rights in databases
09 May 2017

RESTRICTIVE COVENANT CHALLENGES
 Challenges:
 - the availability and portability of data
 - the public nature of social networking sites
 - the blurred distinction between company and employee property
 - the speed and efficacy of online communication
 Ownership of information – Whitmar Publications v Gamage [2013] EWHC 1881
 - social media accounts used by employees for business purposes may effectively
be regarded as the employer’s property.
 Deliberate Migration of data to a social media account is treated differently –
Hays Specialist recruitment v Ions [2008] EEHC 745
 Solicitation – Sean Hanna Ltd v Barber [2015] EWHC 3113 – it would be unduly
restrictive to allow an employee from advertising new business on facebook.
9 May, 2017

MANAGING THE RISK
- Have a social media policy in place – signal to staff
- Make it clear that a breach of the policy is likely to be a
disciplinary offence
- Monitor social media use in the workplace
- If social media is used for recruitment, do not use the
information in a discriminatory way
- Determine whether any client information should be deleted
post-termination and identify and agree ownership rights of
social media
09 May 2017

SOCIAL MEDIA POLICY
- Link it into IT/Email/Internet/Harassment/Disciplinary policies.
- Make it as wide in scope as possible (all kinds of worker).
- Cover employee use of IT resources.
- Ensure it applies for out of hours social media as well.
- Ensure it applies regardless of whether the social media site is
accessed using company equipment.
- Identify the personnel responsible for implementing the policy.
- Include the right to monitor workers computers/
Blackberries/Ipads.
- Include rules for business use of social media.
- Cover employee use of company IP rights and confidential info.
09 May 2017

“TWITTIQUETTE”
Rules to live by:
Would you say it in person?
Remember - everything is public
Difficult to delete – all postings made on the internet can be
recoverable in evidence
Respect client confidentiality
Respect commercial sensitivity
Is the statement that you are making your own view? Do they
also represent the views of the Company? If not, specifically
clarify that
If you would consider the same statement made by someone
else to be offensive or infammatory, don’t make it.
09 May 2017

EMBRACE THE FUTURE
9 May, 2017

Social Media Reputation Management – Jan 2017126
THANK YOU
9 May 2017

ICSA Isle of Man Conference 2017, 10 May

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ICSA Isle of Man Conference 2017, 10 May