The Corporate Secretary’s Increasingly Crucial Role

October 21, 2011 at 5:23 pm

With ever-increasing emphasis on corporate governance practices in light of the financial crisis and the legislative and regulatory response by the SEC and Dodd-Frank, boards of directors are under pressure to quickly adapt to the new business landscape. There is much at stake. Companies having a weak and inadequate framework for corporate governance are more likely to experience anemic profits, higher risk and be held in low regard by investors and industry peers.

As never before, boards of directors are tasked with multiple responsibilities, including oversight of the CEO, succession planning, advancing the strategic mission of the organization, fiduciary duty to stakeholders and finally of course, corporate governance.

With so much on their plates, how can directors adequately focus on corporate governance best practices? Regular director training and education is part of the answer, as well as support from an experienced and diverse group of professional advisors. But increasingly, one of the most important officers in the boardroom, when it comes to overseeing responsible board practices is the corporate secretary. In fact, many organizations, recognizing the broadened role of the corporate secretary, have expanded the title of corporate secretary to include chief governance officer.

How Does the Corporate Secretary Ensure Sound Governance?

A corporate secretary must wear many hats. Elemental to the role is ensuring  accurate and sufficient documentation exists to meet legal requirements. This means, amongst other things, the accurate recording of minutes of board meetings. He or she is also responsible for preparation and distribution of proxy statements and other documentation associated with the annual shareholders meeting. The corporate secretary also responds to shareholder inquiries, acts as a bridge between directors and senior management, maintains corporate records, ensures the organization and the board are in compliance with best governance practices and a tangled web of rules, laws and regulations. The corporate secretary also advises the CEO and is designated as the go-to officer for corporate governance matters. Negotiations with
shareholders (much more common these days) can also be part of the corporate secretary’s purview.

Corporate secretaries must advance sound corporate governance principles within the framework of all of their duties. Every document, every record and every interaction with directors, stakeholders and management must be prepared and undertaken with impeccable governance in mind. If the corporate governance and compliance functions of a corporate secretary seem overly board and complex, that’s because they are. So, how can a corporate secretary in the post-financial crisis environment of Dodd-Frank adequately adapt and offer the support and knowledge a board of directors needs to make sound and ethical business decisions?

Corporate Governance Gatekeeper

During an interview with the Metropolitan Corporate Counsel publication last year, David W. Smith, former President of the Society of Corporate Secretaries and Governance Professionals described corporate secretaries as “gatekeepers and filters of governance and other challenges facing corporations.” Indeed, corporate secretaries must keep abreast of important developments in corporate governance and compliance issues, inform and advise directors of these developments before, and during and after board meetings. Directors rely on the corporate secretary during
meetings to provide expert counsel on governance issues before making decisions. If a corporate secretary fails to properly provide the appropriate information, costly mistakes can be made. Providing the right information, at the right time and in the right amount is often a balancing act. It comes down to proper filtering. However, too much filtering can leave directors uninformed or misinformed.

A Larger Seat at the Table

How can we help the corporate secretary with their increasingly demanding and complex role? One way is to simply provide them with a “larger seat at the table.” The corporate secretary is not the technical record keeper but rather a partner and trusted advisor to the board. More time should be allotted for and devoted to governance and his/her expertise should be fully utilized. On the other hand the corporate secretary must be sensitive to and cognizant of the underlying workings, dynamics and culture of the board. To be fully effective he/she must gain the trust of this high-powered group of individuals.

The corporate secretary must be given the authority and freedom with which to perform and serve the corporation. This starts with who he/she reports into and definitely influences the parameters and perception of the role. In most cases the corporate secretary reports into the general counsel however given the increasing responsibility to the board there is oftentimes a dotted line to the chairman or when the role of corporate secretary is combined with general counsel the position reports into the CEO.

In this perilous regulatory environment, corporate secretaries are more important
than ever before. Dr John Carver, one of the most published thinkers on governance worldwide says that, “it seems to me that corporate secretaries have more opportunity to influence corporate governance in a modernizing direction than academics and lone voices.” Let us give heed to this comment and fully utilize the expertise available to us!

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Entry filed under: Business, Corporate Governance.

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