Private Sector Commission

Article prepared by Mrs. Alison Dillon Kibirige for the Private…

Article prepared by Mrs. Alison Dillon Kibirige
for the Private Sector Commission and the Caribbean Corporate Governance Institute

CORPORATE GOVERNANCE COLUMN
COMPANY SECRETARIES – ADDING VALUE TO ORGANISATIONS

David Jackson, the Company Secretary of British Petroleum said in 2008 ‘ In today’s world, the role of the company secretary has no one meaning and covers a multitude of tasks and responsibilities. That said the role lies at the heart of the governance systems of companies and is receiving ever greater focus.’

This is truer today than it was in 2008 for whatever type of organisation the company secretary is operating within. Governance as we know is more than just compliance it is how an organization structures itself to perform effectively and efficiently in the long-term. There is a lot of empirical evidence that organisations, whether they are family owned, listed, state-owned or in the not for profit sector perform better and are more likely to be sustainable if they have good governance practices.

There is often a misconception that the role of the company secretary is purely administrative, preparing and distributing packs for Board meetings, sitting quietly in the Board room taking notes of the proceedings of the meeting and thereafter producing a set of minutes. These days, however, this is only a small part of what they do.

To add value to the organisations in which they work they should also act as:
• An adviser to the Board on a plethora of issues including reputation risk;
• The organisation’s governance professional; and
• A communicator for the Board both internally and externally.

To enable them to properly advise the Board company secretaries should make sure they are ‘commercially minded’ or aware. They will then be able to advise the Board so that Board can make good practical decisions. Company secretaries therefore need to be able to:

1. Understand how their organisation creates value and makes money
2. Understand what their company needs, now and in the future, so that it continues to make money and create value
3. Have a thorough understanding of their organisation’s competitive advantage
4. Keep up to date with the industry/sector in which their organization operates.

The company secretary is well placed to do this as s/he is probably the only person in the company that has an overview of the whole organisation. This is because they should be involved in many of the major business processes, strategy development, monitoring and evaluation, risk management, human resource, liaison with stakeholders, management and the Board, production of the company’s Annual Report and Accounts and other periodic reporting, legal and governance compliance, among them.

An effective company secretary should be a ‘bridge’ for information, communications, advice and arbitration between the different governance parties, both within and externally to the organisation. These include the company’s owners, its stakeholders, the Board, the Management Team and individual members of the Board and Management Team. This allows the Company Secretary to provide advice to the Board on all aspects relevant to the decision-making process including reputational risk.

The company secretary is often termed the ‘conscience of the company’ as they are required to protect the reputation of the company, some would claim its most valuable asset. They do this through acting with integrity and independence ensuring that both the Board and the company comply with not just the ‘letter’ but also the ‘spirit’ of the law, the company’s values and promises and the company’s license to operate.

When the role of the company secretary is combined with that of another, for example the Head of Legal, it is argued that this compromises the independence of the company secretary as they are answering to management as well as to the company.

Best practice to protect the independence of the company secretary and allow them to give unpalatable advice from management’s point of view to the Board is to have the appointment and any removal confirmed by the Board as a whole. Often the company secretary will also have a reporting line into the Chairman.

If a company secretary is senior enough, has the proper skills, is commercially minded, and most importantly has the backing of the Board they should be able to provide advice that helps a Board avoid the type of governance scandals we have had of late. I am not saying there will never be another scandal but at least Boards will be better informed. Having a properly qualified, commercially aware company secretary is of vital importance especially if organisations are to perform better and be more sustainable bringing the economic benefits through wealth and job creation to countries.

Boards also need to ensure that the governance role is not seen as purely a compliance role within their companies. Many companies are asking their lawyers to act as their governance professionals instead of employing a qualified company secretary as they see a corporate governance code as something to be complied with. Lawyers are used to complying with laws and regulations which are minimum standards. They often apply the same approach to governance and hence fail to protect the reputation of the company which may require the application of a higher standard than just the law. The recent PR issues at Starbucks Coffee Company are an example of this. The company complied with the laws relating to its tax liability in the UK. It did not, however, consider the potential reputational impact of not paying taxes in a country suffering from recession.

In conclusion it can be said that while the Board makes the policies and takes decisions, it is the company secretary that has the responsibility to ensure that they are in ‘the best interest of the company’ and that they are implemented by management as such it could be argued that the company secretary is the ‘backbone’ of the company and a very essential role in any kind of organisation.

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