FINANCIAL PLANNING:WHAT’S THE POINT OF THE COMPANY SECRETARY? THE RESPONSIBILITIES OF A BUSINESS’S CHIEF EXECUTIVE OR FINANCE DIRECTOR ARE REASONABLY WELL UNDERSTOOD, BUT THE ROLE OF THE COMPANY SECRETARY IS OFTEN DOGGED BY MISUNDERSTANDING. Clearly, a company secretary is not a typist who makes cups of tea and nips out to for sandwiches. But perceptions are stereotyped. Company secretaries are often pigeonholed as little more than and on how these responsibilities should be discharged.” More recently, the parliamentary corporate governance group noted that the company secretary is often neither part of line management nor a member of the board itself. The role is changing from being the “administrative servant of the board” to one that encompasses the broader role of “board advisor,” it said. David Press, a partner in DMJ Recruitment, says company secretaries are now required to act in a much more commercial way and around half of all FTSE 100 secretaries are lawyers because boards think a solicitor will have a better understanding of law, listing rules and other requirements. Alongside the chief executive, the company secretary holds one of the few posts that can cut across all departments in a business. From HR, to marketing and IT, there is a natural tendency to become absorbed by departmental objectives and the company secretary can play an invaluable role in helping to align the organisation to a common purpose. “It’s a tremendously important role and a difficult one too,” says Robert Swannell, chairman of Marks & Spencer. “There’s an element of ambiguity that comes with being both a member of the executive and the point person for the chairman and non-executives. And it’s the company secretary’s responsibility to ensure the conscience of the board is properly exercised. They need the strength of character to raise reservations fearlessly.” A survey published by consultants Korn/Ferry and KPMG last year highlighted one area where a good company secretary can add real value to a business. The report revealed that one in five non-executives feel out of depth in board boardroom discussions because of inadequate briefing materials. It is easy to see why, says Jennifer Sundberg, founder of strategic consultants Board Intelligence. The main source of information for most non-executives is the board pack and, regardless of sector or size of company, these have certain characteristics in common. They are invariably too big to read, running to many hundreds of pages a month; they are too narrow in scope, being heavily weighted towards backward-looking financials; and they are so turgid in style they are an obstacle to clear thinking, she says. No matter how knowledgeable and experienced a board may be, its members are effectively blindfolded until they are provided with the information around which they can formulate their judgment, says Sundberg. Managing the flow of information to a company board is regarded as one of the most difficult challenges facing company secretaries, she says. If the information is too detailed it will not help the board focus on the key issues. If it is too high-level the non-executive directors may not understand the assumptions that have been made about the extent of any risk, and it may provide them with false assurance. One side effect of the growing importance of corporate governance matters has been to question whether the title of company secretary has become outdated. In the United States, the Society of Corporate Secretaries has recently changed its name to the Society of Corporate Secretaries and Governance Professionals. In Britain, ICSA has just renamed its professional magazine, The Chartered Secretary, to become Governance & Compliance. Such moves underline how far the company secretary profession has changed in recent years. “The days when the company secretary who spoke in the boardroom would be told, ‘You’re here to write, not to talk’, are long gone,” says Malcolm Wood, who holds that position at Standard Life.administrators, principally concerned with keeping the minutes of company meetings and ensuring compliance with the Companies Act. It is sometimes thought the company secretary is just a part of the finance director’s function. “There are few people today who would recognise that description,” retorts Simon Osborne, chief executive of the Institute of Chartered Secretaries & Administrators (ICSA). He oversees a professional body more than 100 years old that represents 12,400 company secretaries in the UK and Ireland plus another 24,500 in 70 overseas countries. More than two-thirds of the 10,900 students training for ICSA qualifications are from overseas countries, led by China. “Company secretaries, particularly those who qualify as Chartered Secretaries by passing the Institutes (Masters level) qualification, are highly-skilled professionals playing a strategic role within their companies,” says Osborne. “They work closely with the chairman and other directors to ensure the board is properly run, and are able to take important decisions in relation to the companys strategy, its execution, and the management of risk.” The office of company secretary is one area of the boardroom where women have broken through the so-called ‘glass ceiling’ that can hinder career progress. Women make up just 5 per cent of the executive directors of FTSE 100 companies, but five out of the top ten UK companies - GSK, Vodafone, BATS, Lloyds and BHP - have female company secretaries. Nevertheless, there remain widely differing views about the importance of company secretaries. When the all-party parliamentary corporate governance group polled more than 400 executives and directors for a recent report on the function of the company secretary, it found a wide disparity of opinions. For some, the company secretary’s role is a purely administrative function, with one chairman commenting that if he barely noticed his company secretary then they were probably doing a good job. But for others, the company secretary is pivotal to shaping governance and board practices - a point highlighted by Lord MacLaurin, former chairman of Vodafone and Tesco, who has says: “The company secretary should provide the heartbeat of the business.” The confusion over the role of company secretary is slightly surprising since the job is much more clearly defined than other corporate posts. All public companies are obliged under Section 261 of the Companies Act 2006 to have a company secretary who is an officer of the company. By contrast, there is no legal obligation on a company to have a chief executive or head of marketing. Formal duties include maintaining the company’s books, the register of past and present directors, changes in shareholders, minuting board meetings, filing annual returns at Companies House, and arranging the annual general meetings. For many years these duties dominated. However, a growing number of corporate scandals in the 1980s - notably the collapse of companies such as Maxwell Communications, Polly Peck and the Bank of Credit & Commerce International - triggered demands for a fundamental overhaul of the way the UK’s boardrooms governed themselves. This has transformed the role of company secretaries. The Cadbury Report in 1992, the first attempt to tighten boardroom behaviour, highlighted the increased role of the corporate secretary as follows: “The chairman and board will look to the company secretary for guidance on what their responsibilities are under the rules and regulations to which they are subjectand on how these responsibilities should be discharged.” More recently, the parliamentary corporate governance group noted that the company secretary is often neither part of line management nor a member of the board itself. The role is changing from being the “administrative servant of the board” to one that encompasses the broader role of “board advisor,” it said. David Press, a partner in DMJ Recruitment, says company secretaries are now required to act in a much more commercial way and around half of all FTSE 100 secretaries are lawyers because boards think a solicitor will have a better understanding of law, listing rules and other requirements. Alongside the chief executive, the company secretary holds one of the few posts that can cut across all departments in a business. From HR, to marketing and IT, there is a natural tendency to become absorbed by departmental objectives and the company secretary can play an invaluable role in helping to align the organisation to a common purpose. “It’s a tremendously important role and a difficult one too,” says Robert Swannell, chairman of Marks & Spencer. “There’s an element of ambiguity that comes with being both a member of the executive and the point person for the chairman and non-executives. And it’s the company secretary’s responsibility to ensure the conscience of the board is properly exercised. They need the strength of character to raise reservations fearlessly.” A survey published by consultants Korn/Ferry and KPMG last year highlighted one area where a good company secretary can add real value to a business. The report revealed that one in five non-executives feel out of depth in board boardroom discussions because of inadequate briefing materials. It is easy to see why, says Jennifer Sundberg, founder of strategic consultants Board Intelligence. The main source of information for most non-executives is the board pack and, regardless of sector or size of company, these have certain characteristics in common. They are invariably too big to read, running to many hundreds of pages a month; they are too narrow in scope, being heavily weighted towards backward-looking financials; and they are so turgid in style they are an obstacle to clear thinking, she says. No matter how knowledgeable and experienced a board may be, its members are effectively blindfolded until they are provided with the information around which they can formulate their judgment, says Sundberg. Managing the flow of information to a company board is regarded as one of the most difficult challenges facing company secretaries, she says. If the information is too detailed it will not help the board focus on the key issues. If it is too high-level the non-executive directors may not understand the assumptions that have been made about the extent of any risk, and it may provide them with false assurance. One side effect of the growing importance of corporate governance matters has been to question whether the title of company secretary has become outdated. In the United States, the Society of Corporate Secretaries has recently changed its name to the Society of Corporate Secretaries and Governance Professionals. In Britain, ICSA has just renamed its professional magazine, The Chartered Secretary, to become Governance & Compliance. Such moves underline how far the company secretary profession has changed in recent years. “The days when the company secretary who spoke in the boardroom would be told, ‘You’re here to write, not to talk’, are long gone,” says Malcolm Wood, who holds that position at Standard Life.
Posted on: Wed, 06 Aug 2014 02:01:54 +0000
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