Agenda item

To consider a report which sets out the key findings and recommendations of the Shareholder Working Group in relation to the governance of the Council’s wholly-owned companies.

The Sub-Committee considered a report which set out the key findings and recommendations of the Shareholder Working Group in relation to the governance of the Council’s wholly-owned companies, having regard to its review of compliance with the published CIPFA guidance and other good practice.

 

The Working Group had been chaired by the late Councillor S Carter during this first phase of the review. The review was ongoing and would continue into next year.

 

The Working Group’s conclusions regarding the most effective approach to designing the Council’s longer term company governance, reporting and board arrangements were as follows:

 

1.    There should be a revised Board structure to support good governance.

2.    There should be an observer appointed to attend meetings of each company board to report direct to the Finance Sub-Committee as the shareholder committee.

3.    Immediate attention should be given to rectifying some areas, including the removal of Cheshire East Residents First (the group structure) from the governance structure and relevant documentation.

4.    A further in-depth review of Shareholder documentation should be undertaken.

5.    The risk appetite of the Council in respect of company risk was overall rated as ‘Low’ and risks should be appropriately mitigated to this position.

6.    Risk mitigation and controls should be improved.

7.    The Working Group should continue to report on future proposals for improving governance.

 

Further details were set out in the report.

 

The Director of Governance and Compliance presented the recommendations set out in the report. In doing so, he advised that the remuneration of observer members on company boards would be a matter for consideration by the Independent Remuneration Panel as part of its next full review of members’ allowances. He also advised that the full Council date in recommendation 3.1(a) would need to be changed to a later date to be determined by the Sub-Committee.

 

To assist members in considering the proposals, diagrams showing the current and proposed governance arrangements were circulated at the meeting. The proposed governance arrangements included the removal of Cheshire East Residents First (CERF) as a holding company, with companies reporting direct to the Finance Sub-Committee in future as the shareholder committee.

 

Members commented that a low-risk approach as advocated in the report could mean that the companies would miss out on opportunities by being too risk averse. Officers responded that business opportunities could still be reported to the Sub-Committee for consideration.

 

The recommendations in the report were moved and seconded subject to the determination of a suitable Council date from which the new arrangements would take effect.

 

An amendment to the substantive motion was then moved and seconded that the following changes be made to the recommendations in the report:

 

3.1(a) Two elected members to be appointed to each company board.

 

3.3 the amended shareholder agreements set out in Appendices 1 and 2 be further amended as follows:

 

Para 4.1.1 to provide for two elected members to be appointed to each company board.

 

Para 4.7 to provide that the quorum at any meeting of the directors shall include at least one elected member who is a member of the board.

 

Para 4.8, which provides that the chair of the board will be the managing director, be deleted.

 

It was noted that these arrangements may need to be adapted to the particular circumstances of Tatton Part Enterprises, given the small size of that company.

 

RESOLVED (unanimously)

 

Thatthe Sub-Committee agrees that

 

1.    From 18 October 2023 (date of Full Council), the Board of Directors of each of the wholly-owned companies will be comprised as follows:

 

§  Two elected Members to support local knowledge and service user functions. The Members will be appointed by the Finance Sub-Committee following an open expression of interest and a transparent process; and

 

§  Two Council Officers, being 1x Finance Officer (on the recommendation of the Chief Finance Officer) and 1x Service specific officer (on the recommendation of the Chief Executive);

 

§  The Managing Director of the wholly-owned company; and

 

§  At least one Director who may be appointed through external advert, being an independent sector specialist appointed for their expertise by the Finance Sub-Committee, supported by the Council’s HR service.

 

2.    An Observer will continue to be appointed to attend meetings of the Board of each company as the Shareholder representative by the Finance Sub-Committee from amongst its membership. The Observer will have the right to access all information and documents, to attend all meetings and to ask questions of the Board.

 

3.    All current and future Director appointments will be subject to a Shareholder approved service contract, and all Directors will be required to enter into this contract as part of their new or continuing appointment.

 

4.    The amended shareholder agreements set out in appendices 1 and 2 be adopted from 18 October 2023 subject to the following further amendments:

 

Para 4.1.1 to provide for two elected members to be appointed to each company board.

 

Para 4.7 to provide that the quorum at any meeting of the directors shall include at least one elected member who is a member of the board.

 

Para 4.8, which provides that the chair of the board will be the managing director, be deleted, and the remaining paragraphs of that section of the shareholder agreement be renumbered accordingly.

 

5.    That Cheshire East Resident First (CERF) no longer form part of the governance structure of any Council wholly-owned companies and any shares it holds be transferred to Cheshire East Council.

 

6.    That the Shareholder Working Group be asked to continue to:

 

(a)  undertake a full detailed review of the Shareholder Agreements against the CIPFA guidance and other good practice;

 

(b)  ensure that the wholly-owned companies support the Council’s strategic objectives and decision-making;

 

(c)  ensure that an appropriate and proportionate mechanism for control and review of risk is developed;

 

(d)  consider the purpose of Orbitas Bereavement Services and Tatton Park Enterprises;

 

(e)  consider the creation of a timely mechanism for seeking shareholder permissions between scheduled committee meetings; and

 

(f)    develop a business planning template to be implemented across the wholly-owned companies.

 

7.    Company risk registers and strategic decisions made by the companies form part of the reporting and monitoring mechanisms.

 

8.    It be recommended to the Corporate Policy Committee that companies’ risks should be a separate category on the strategic risk register.

 

9.    That the Council’s risk appetite in respect of the companies is ‘Low’ and that the companies should maintain a low-risk approach to business activity.