Role of Company Secretary in governance Flashcards
Why might a private company appoint a company secretary?
Why is the company secretary often referred to as a bridge for
information, communications advice and arbitration?
What are the main duties of the cosec?
governance;
- Board compositions and procedures
- Board information, development and relationships
- Accountability (Financial reporting, risk control, rem, relationship with shareholders, disclosure and reporting
statutory and regulatory compliance;
- Directors’ duties
- Share dealing
- Protection of inside information
- Verification of published information
- Responsible release of market information
- Compliance with LPDTR rules
advising the board and senior management; and
- Good board practices
- Transparency and disclosure
- Relationship with stakeholders
- Conducting business ethically
- Board’s commitment to corporate governance
being the board’s communicator
- Communicate between management team and board,
- manage disclosure to regulators
- Facilitate good information flaws between board, between individual board members , committees, management etc.
Also responsible for insurance, pensions and admin matters.
Why is it important for a company secretary to have interpersonal
skills and commercial and business acumen?
Many company secretaries face the following key challenges:
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; and
maintaining independence from other executives and board members.
To overcome these challenges company secretaries, in addition to their technical
skills, needed commercial and business acumen and interpersonal skills, which
many considered the most important.
In 2012, a study by the All Party Parliamentary Corporate Governance Group
criticised many company secretaries for not being ‘commercially minded’ or
aware. They saw this as being an important feature of the job, especially as they
advise the board on governance issues. To be commercially aware, an individual
must understand the business they are in, and make good practical decisions as
a result. In the case of the company secretary, this means being able to advise
the board on this basis so that they can make the decisions.
‘The Company Secretary: Building trust through governance’ highlighted
the importance that the majority of company secretaries acknowledged that
‘commercial awareness and abilities are critical to ensuring their understanding
of what is right for the organisation, what information means and to whom
relevant questions need to be passed’.
Name five interpersonal skills a company secretary should have
and explain why each one is important to the company secretary in
fulfilling their responsibilities.
Empathy and relationship management – it is important for company
secretaries to be able to build relationships to enable them to remain
independent and to carry out their roles as conscience of the company and
the governance adviser.
Respectful, diplomatic and effective communication – to build
relationships, especially with senior people within an organisation,
the company secretary will need to be respectful and diplomatic. The
communications with these senior people will have to be brief and clear as
they may not have the time for a long-winded explanation.
Active listening – the company secretary should look interested in what
they are being told. This is part of being respectful. It will also help the
company secretary to build relationships and obtain the information they
need to do they job.
Bringing issues to the surface, especially those relating to reputational
risk – managing reputational risk is now seen as an important part of
governance. As the governance adviser, the company secretary will
therefore be required to raise with the board, at meetings or on other
occasions, matters that are relevant to the reputation of company.
Personal and social awareness – company secretaries need to be able to
read the body language of the board members to help with interpreting
what is said and meant at board meetings. This enables them to write the
minutes. Company secretaries also need to be personally aware of how
their own behaviours may effect the decision making of the board.
Being able to summarise common concerns and interests – the company
secretary may have to summarise a decision within a board meeting so
that it is clear to all board members what decision they have taken. They
may also have to highlight the concerns of management or external
stakeholders during a board meeting to ensure that the board has all the
information to make an effective decision.
Generating alternative solutions – in order to help the board make a
decision, it may be necessary for the company secretary to come up with
an alternative solution. For instance, they could suggest a decision is
delayed whilst more information is collected, or that there is additional
reporting on the implementation of a proposal to give the board members
reassurance on a decision.
Respecting confidences – the origin of the wo d ‘secretary’ is the keeper of
secrets and confidentiality is still an important part of the ole. To be able
to discuss and advise the board and management, the company secretary
needs to be trusted with information.
Independent mindset – the company secretary has to be impartial as
they work between the board and management, and the board and
shareholders. To ensure that these relationships between the different
governance parties work effectively, the company secretary will have to
work with an open mind and see both sides of the arguments.
Strength of personality – the company secretary needs to have the strength
to stand up to the strong personalities in the organisation and present
good governance practices. Sometimes the board and management may
not want to hear what the company secretary has to say, and the company
secretary needs the strength to be persistent in a respectful way.
Appreciating the views of all parties – as mentioned above, it is important
that company secretaries keep an open mind and appreciate the views of
all parties when carrying out their role.
Effective team-working – company secretaries are often required to lead or
be members of teams producing major company projects, whether this is
production of the annual report and accounts, being part of an M&A team
or in the event management of the annual general meeting.
Disagreeing constructively – often the company secretary may have to
inform the chair or the CEO that they cannot do what they want to do.
Being able to do this in a constructive way, and offering alternatives is
better than just saying no.
Emphasising commercially minded approaches – the benefit of an in
house company secretary is that they should know their business. They
should therefore be able to suggest commercially-minded solutions and
approaches to problems and issues that arise.
Integrity – as the conscience of the company it is important that the
company secretary has the highest levels of integrity.
Why does a company secretary’s position need to be one of
seniority?
In order for the company secretary to carry out their duties and responsibilities
effectively, they need to hold a position of seniority within the organisation. It is
debated whether they should be a member of the executive team. Some think
this compromises their independence. Whether or not they are a member of the
executive team, they should attend meetings of the executive team. This will
enable them to advise the executives on governance issues arising out of any
proposals as they are being formulated. They can also advise on how the board
might react to a particular proposal and what questions the executive should be
prepared to answer when the proposal is considered by the board. Attending
executive meetings also helps the company secretary get an understanding
of the executive’s positioning and reasons for suggesting the proposal which
may help the company secretary if the proposal needs to be ‘sold’ to the chair.
Remember that the company secretary can often fill the ole of mediator or
arbitrator between the CEO and the chair.
How can an organisation maintain the independence of the
company secretary?
‘Appointment of the company secretary’ states that:
‘Boards have a right to expect the company secretary to give independent,impartial advice and support to all the directors, both individually and collectively
as a board.’
It is for this reason that best practice is that company secretaries should be
appointed and dismissed by the board as a whole.
What are the major challenges to independence of the company
secretary?
The two main challenges to the independence of the company secretary are
caused by:
reporting lines, especially when the company secretary reports to a
member of management; and
dual roles – there may be conflict between the esponsibilities of the other
role with those of the company secretary.
Is it appropriate for the company’s in-house lawyer to carry out
corporate governance responsibilities?
If the company secretary role is combined with another role such as that of the
in-house lawyer or accountant, care should be taken to see that the governance
role is not compromised.
A general counsel who is also given the role of the company secretary, in
fulfilling their legal ole will often have to take sides to represent the particular
interests of the company. And although they may be complying with the letter
of the law and in the interests of management, they may not be acting in the
best long-term interests of the company. This would be inconsistent with the
company secretary’s governance role which requires impartiality when advising
on governance issues.
It may also prevent a company secretary from speaking out against bad
governance or unethical practices, or proposals that are not in the long-term
interests of the company, especially if to do so was costly or against the wishes
of the CEO. The company secretary, in their governance role, should also be
considering the reputational impact of the board’s decision. This again may
require the board to consider more than just complying with the laws and
regulations.
Explain why companies may not want to outsource the role of the
company secretary.
An in-house company secretary acquires an in-depth knowledge and
understanding of the company and its history, and also develops
relationships with the board and management that an external firm lacks.
An in-house company secretary is available at all times to discuss corporate
governance issues. A law firm may be much slower in p oviding assistance
or responding to questions.
A qualified in-house company sec etary offers a wide range of services and is able to take on other responsibilities in a start-up or smaller company.
An in-house company secretary may provide support that is difficult for
an external firm to p ovide; for example, assisting the chair to prepare for
meetings.
An in-house company secretary can truly act as the ‘conscience of the
company’ and has no conflict, in that they do not do other work for the
company such as providing legal or accountancy services.
An in-house company secretary can be relied upon to maintain
confidentialit . In-house corporate secretaries can in many cases be held
liable for any breaches in confidentialit , whereas this may be problematic
in cases of an outsourced service.
Chapter summary
The company secretary role is at the heart of governance within an
organisation.
The duties of a company secretary can be divided into four categories:
governance, compliance, advice and communication.
The company secretary should be appointed and removed by the whole
board.
It is important for an organisation to protect the independence of the
company secretary by ensuring that they cannot be influenced by individual
members of the board or senior management team.
The company secretary is the ‘conscience of the company’, ensuring that
the company always does the right thing.
It is equally important for company secretaries to have interpersonal skills
and commercial awareness as well as technical skills.
Why have different countries’ corporate governance best practices
developed in different ways?
Corporate governance has developed in different ways in different countries
to reflect their distinct legal systems and also the specific issues that they e
dealing with
