The role of company secretaries has changed markedly. Domini Stuart reports on how they are stepping up to the challenges of supporting the board.
Twenty years ago, even 10 years ago, a company secretary prepared agendas, organised board meetings and took minutes. He – and it inevitably would have been a ‘he’ – would have been seen as a reliable, quiet and loyal servant to the board.
Today’s company secretaries are as likely to be female as male, young and committed to building a dynamic career. They are more likely to have a legal qualification than a background in finance or accounting.
They are also more likely to have a far more involved and interactive role, providing advice and guidance to the board on legal, compliance, corporate governance and risk management issues and acting as a confidential sounding board to the chairman and directors.
“This is the biggest transformation we’ve seen in any executive role over the past two decades,” says Peter Kronborg FAICD, Executive Chairman of strategic leadership advisors OPPEUS. “The job has moved very much from regulatory compliance to the proactive role of an executive who makes a very significant contribution to the organisation. Most chairmen and directors are sincerely appreciative of this support in the face of the enormous growth in size, scope and complexity of governance responsibilities that have fallen on to the board table. The company secretary’s role has grown into that space.”
Kim Hancock FAICD, chairman of Aerial Consolidated Transport, has found that a good company secretary gives the board more freedom to focus on getting the business moving forward and keeping it moving. This was particularly valuable when Aerial made the transition from co-operative to company in 2005.
“Carol (Aldridge) was with us all the way, guiding us through the change and keeping us on our toes in terms of what was needed,” says Hancock. “She remains a great support to the board, and to me in particular.”
Directors are balancing the needs of many stakeholders – shareholders, employees, customers as well as regulators.
“They make decisions in real time, and there could be a different agenda item almost every 15 minutes,” says Michaela Healey, company secretary at National Australia Bank. “The clock is ticking – the company secretary must be ready to support the directors and ensure that they have access to all the information and advice they need in order to make the right decision.”
A particular challenge for non-executive directors is the scope of their interaction with the company.
“They may only meet once a month for a day or two and that’s the lens through which they’re viewing the organisation,” Healey continues. “The company secretary needs to assist them to experience the company and have a good sense of what is really going on in the organisation rather than letting them feel that they’re in a glass box looking out.”
The decisions which need to be made so swiftly are increasingly complex. When it came to shareholder value, profit once ruled supreme. Now companies are expected to balance this with other, often competing, priorities, including sustainability, corporate social responsibility and ethics.
Ross Mallett, company secretary at Futuris, observes that recent cases such as those involving James Hardie and Australian Wheat Board have driven the point home.
“Incidents like these tend to prompt boards into making sure their companies have adequate processes in place,” he says. “I think a lot of companies have been reviewing their corporate policies and practices, including codes of conduct, to ensure they meet accepted standards of corporate social responsibility and ethics. The company secretary can help by monitoring both changes in the regulatory environment and community expectations and bringing them to the attention of the board. Company policies can then be adapted to meet these changing needs.”
Legal governance is already picking up on ethical behaviour – for instance, one of the requirements of the ASX Corporate Guidelines is that companies have a code of conduct in place for their employees.
While the CEO and the board establish the culture of an organisation, the company secretary plays an important role in supporting that. A company secretary will sometimes need to be quite confident in order to put the issues of corporate governance or ethics on the table in a way that is acceptable by the board.
Stakeholders are increasingly making the connection between good governance and a company that is generally well-run. Most directors appreciate the nature of the company secretary’s contribution and understand the need for their specialist skills. However, this can pose a problem for smaller companies.
“Most of the company secretaries in the top 100 organisations would have legal qualifications,” says Mallett. “Below that, you often find that, say, the CFO or general counsel has been coopted into the role. By the 400 level you might find the owner trying to keep up with changes to legislative requirements as well as run the business, which is a very big ask.”
Bruce Linn FAICD has wide-ranging experience as a director with small and medium enterprises. He says it’s quite common in businesses of this size for a director to take on the role of company secretary. He has also formed a view this isn’t necessarily best in terms of governance.
“I believe you need someone who’s an honest broker – someone who can advise on issues with clarity and some independence,” he says. “If you’re also a director, you really can have a different set of responsibilities to take into account. This can create risk which companies should avoid.”
Linn adds that all boards need to consider very carefully whether their company secretary has the appropriate skills and expertise. If not, they should provide appropriate training and resources, or bring in skills from outside.
“Smaller companies are increasingly in need of external assistance in fulfilling the company secretary role,” he says. “In the future, this could be from someone analogous to an independent director – a company secretary who works for a number of organisations. The problem is that the company secretary really does need a deep understanding of the organisation so, while I don’t think we’ve got a clear solution yet, I tend to think that’s the way things will go.”
An effective relationship
A good quality board includes people with a wide range of experience and skills. Inevitably, they will also have a wide range of needs and expectations.
“In my case I have 13 directors on the board and each of them brings a quite different perspective,” says Healey. “Addressing their individual needs can be challenging; I find the best approach is to view directors as my clients and respect their individuality.”
There are problems inherent in keeping across both the big picture and the small details.
“One of the greatest challenges of the role is that, if everything goes perfectly well, no-one notices,” says Healey. “Yet if there’s one small defect in the board papers or if they’re not out on time there can be a strong reaction.”
John O’Grady, general counsel and company secretary at Ramsay Healthcare, believes that every company secretary needs to earn the trust and confidence of the board.
“Once this is established, the board should fully involve the company secretary in all board and board sub-committee meetings and functions,” he says. “Given the growing complexity of legal compliance, it is also essential that the company secretary has the support of the board in keeping up to date on all relevant legal requirements and best governance practices.
“Today’s company secretaries need to be pro-active and to anticipate the needs of directors. The deeper their understanding of the ‘colour’ of the organisation, the more effective their contribution to the board is likely to be.”
In addition, boards need to be sure that their company secretary is representing the views of the board if they are responding to requests addressed to the board or the company. And, as a bridge between the board and management, company secretaries need the trust and respect to run in both directions.
“If I send an email out to the management team saying that the chairman needs a report in two days, it’s important that they acknowledge my role as a representative of the board and that the request as important,” says Fiona Mead, company secretary at Asciano.
“At the same time, the board needs to recognise the pressures and constraints of the management team. If they ask for a paper to be done in two days, they have to understand that this will be taking resources away from another area. It can take some time to get these connections between the board and the management team flowing, but the relationships develop over time. We have only been listed for 18 months, so we were really started from scratch. It’s very interesting to watch the relationships building.”
Feedback and communication
While the company secretary reports to the board and may provide some services to individual directors, he or she is also a member of the management team and, as such, responsible to the CEO. That means communication needs to be managed very carefully.
Some directors may feel they have the right to go around the CEO and talk directly to the company secretary.
“I’ve had some experiences where that has caused problems,” says Linn.
“Boards need to consider lines of communication and put appropriate guidelines in place to ensure that these unhealthy triangulations don’t develop.
“There are times when it’s appropriate and necessary for directors to talk to the company secretary, but the chairman and CEO should be in the loop unless there’s an issue with the CEO. The chairman should never be excluded.”
As most directors sit on a number of boards they are uniquely placed to provide feedback.
“They see how different companies are being run,” says Mead. “I always say if they see something being done better elsewhere, please let me know.”
Points of view
Chartered Secretaries Australia says that a good, proactive company secretary should:
- Advise on best practice of governance;
- Provide or support a compliance framework which will protect the company’s integrity;
- Support high standards of ethics and corporate behaviour; and
- Provide a link between board, senior management and shareholders.
While practices could be quite different across companies of different sizes, Fiona Mead suggests they need to have:
- Clearly defined charters;
- Guidelines for board papers and timings;
- Regular and well-informed board meetings; and
- Opportunities for the board to talk openly at meetings without management but also regular contact with management so that information is flowing freely between the two.
Peter Kronborg recommends that directors can enhance the relationship by:
- Recognising the importance of the role and the need for the best possible competence they can afford;
- Allowing the company secretary to engage, inform and respond to the board’s needs; and
- Acknowledging the role’s significant expertise and that people need ongoing and broader education if they are to carry this mantle of responsibility effectively.
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