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Directors' know how is a monthly article, which highlights key rule changes, proposed changes and market updates so that you know what is coming down the track.

ICSA: the Governance Institute and Henley Business School publish report on managing boardroom tension

ICSA: the Governance Institute and Henley Business School have jointly published a report (which can be assessed by registering for free) on how to effectively manage conflict tension in the boardroom to produce better board dynamics.

Drawing on the experiences of a number of board members working in different roles, the report seeks to understand how chairs and company secretaries can avoid board conflict and facilitate productive tension to achieve better outcomes for their organisations.

The report emphasises that while effective boards are collaborative, they must also be places of challenge and independence, where all members are able to empathise with the views of others

The report found that:

  • Good boards manage tension, while dysfunctional ones allow unresolved tensions to fester.
  • Tension and conflict are clearly distinguishable. Tension is disagreement that, while potentially uncomfortable, is a positive feature of an effective board and can be resolved by healthy debate. On the other hand, conflict is characterised as aggressive tension that can escalate to extreme levels and can irreversibly alter the dynamics of the board.
  • Tension and conflict often occurs when making decisions, but can also be linked to people, personalities and historical issues.
  • Tension is most likely to be disruptive when disagreements and concerns are left unresolved for too long. This is especially relevant for issues concerning people and personalities.
  • Boards should proactively seek to manage tensions and minimise conflict. Effective strategies include explicitly acknowledging concerns during board meetings; having face-to-face conversations; and depersonalising tension by reminding board members of their ‘higher purpose’.
  • Effective conflict resolution usually takes place away from the boardroom. However strategy and decision issues should be resolved in the boardroom.
  • Chairmen, company secretaries and senior independent directors play key roles in managing tension and conflict resolution. Although company secretaries are particularly well placed in resolving conflict by facilitating and maintaining a board’s ability to function.

ICSA: the Governance Institute will be hosting an event on Tuesday 17 October 2017, 8.00am – 9.30am, to discuss the report in more detail.

Office of Tax Simplification publishes report recommending the digitisation of paper stamp duty on shares

The Office of Tax Simplification (OTS) has published a report outlining its recommendations for reforming, digitising and simplifying stamp duty on paper documents.

Among its core recommendations – which address the main practical challenges that taxpayers face – include:

  • Implementing a digital process for stamp duty instead of the current system involving sending a paper document to the Birmingham Stamp Office to be stamped;
  • Making stamp duty an assessable tax so that it is no longer ‘voluntary’ as at present;
  • Amending the rules governing company registrars so that they can register transactions on the same day, if required; and
  • Limiting the scope of stamp duty to the transactions it applies to in practice (for example, in relation to transactions in non-UK shares).

The OTS also provides a number of further recommendations regarding how stamp duty could be simplified, which could either be carried out at the same time or as part of a future roadmap including:

  • Simplifying and clarifying important technical matters such as the stamp duty consideration rules;
  • Incorporating modernised stamp duty legislation under the umbrella of Stamp Duty Reserve Tax (SDRT), while repealing current stamp duty legislation (which is presently spread across several Acts of Parliament); and
  • Ensuring that the digital process is developed in a way that will both provide the maximum benefit to taxpayers and most effectively use transaction information possessed by HMRC to assist their compliance work.
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