3. Role of the company secretary in governance Flashcards
What is a company secretary?
ICSA: The company secretary is a strategic position of considerable influence at the heart of governance operations within an organisation
Who needs to appoint a company secretary?
Private companies do not need to appoint a company secretary (s.270). However, all public companies must appoint a company secretary (s.271).
What does the UK Code say about the company secretary?
Provision 16: ‘all directors should have access to the advice of the company secretary, who is responsible for advising the board on all governance matters. Both the appointment and removal of the co-sec should be a matter for the whole board’
What are the four core duties of a co-sec? SCAG
- Statutory Compliance – Companies Act, FCA LPDTRs, MAR, directors’ duties, share dealing, protection of insider information, verification of published information
- Communicator - board decisions to regulators and stakeholders, liaising between board members on logistics for board meetings, facilitating good information flows, primary contact for NEDs
- Advisor – good board practices, transparency and disclosure, relationships with stakeholders, corporate responsibility, etc
- Governance – board composition and procedures, board information, development and relationships, accountability, remuneration, etc
What did the Company Secretary: Building trust through governance (2014) study show?
Many cosecs found that their role was misunderstood and many of their duties were considered administrative in nature. The importance of what they contributed to effective governance and decision making was not appreciated. Key findings of report:
• Cosecs delivers strategic leadership, acting as a vital bridge between executive management and board
• Cosecs are ideally placed to align the interests of different parties around a boardroom table, facilitate dialogue and enable decision making
• It is essential that the cosec has both direct and informal access to board members
• To maximise the effectiveness the cosec should report to the chair and there should be a party of esteem and good working between the ‘triumvirate at the top’
• Role is more increasingly outward-focused i.e. incorporation of investor engagement and corporate communications
• ICSA qualified CS deliver a more rounded governance and board member service
• There is a conflict of interest with the General Counsel and Company Secretary role – the roles should be separate, as they can be incompatible
• Cosecs are often the longest-serving members present at board meetings, and so are a vital repository of company history and culture and a guarantor of continuity
• Diverse backgrounds – often as a second or third career – therefore, have a diverse set of skills and experience
What are the key challenges faced by company secretaries?
- Being considered traitors by the executive team
- Supporting chairs exhibiting poor performance
- Acting as the third person in a CEO-chair relationship
- Becoming a pivotal contact for unsurmountable problems
- Maintaining independence from other executives and board members
What are the requirements of a company secretary under the CA2006?
s. 273 requires directors of public companies to enlist the services of a secretary, who should:
1) be a person who appears to them to have the requisitive knowledge and experience to discharge the functions of the secretary; AND
2) have one or more of the following qualifications:
- have been a secretary of a public company for at least three years of the five years immediately preceding his or her appointment;
- is a member of one of the seven professional bodies
- is a qualified barrister or solicitor
Give some examples of interpersonal skills for a co-sec
- Empathy and relationship management
- Respectful, diplomatic and effective communication
- Active listening
- Bringing issues to the surface, especially those relating to reputational risk
- Personal social awareness
- Being able to summarise common concerns and interests
- Generating alternative solutions
- Respecting confidences
- Independent mindset
- Strength of personality
- Appreciating the views of all parties
- Effective team-working
- Disagreeing constructively
- Emphasising commercially minded approaches
- Integrity
Give some examples of commercial and business acumen skills
- Keep up to date within your industry
- Understand how the company makes money and creates value
- Understand what your company needs, now and in the future
- Thorough understanding of the organisation’s competitive advantage
Who should the co-sec report to?
ICSA Guidance Note – should report to chair – if other executive or administrative duties, should report to CEO or applicable director
Who determines the co-secs remuneration?
Board or remuneration committee to protect independence of cosec
How should a co-sec be evaluated?
Annual board evaluation or 360 degree evaluation fed back to remuneration committee – South Africa has a company secretaries evaluation questionnaire template
What are the two main challenges to the independence of a co-sec?
- Reporting lines
- Dual roles – a general counsel also given role of cosec will often take sides in fulfilling their legal role to represent the particular interests of the company – therefore may not be acting in the best long-term interests
What are the liabilities of a co-sec?
• default fines and other penalties for officers under the Companies Act 2006
• Insolvency Act 1986, for damages awarded by the court in the course of a winding-up of a company if there has been a misfeasance or breach of trust in relation to the company
A company secretary can, under s. 1157 CA2006 apply to the court for relief in respect of any liability.
Hilsborough disaster - former company secretary of Sheffield Wednesday football club had been charged with offences relating to his responsibilities for health and safety of the ground.
