Very important person

The company secretary plays a crucial role in the relationship between the board and the executive, so strengthening relationships is vital, writes Tony Featherstone.

It has been said the company secretary has two main roles: to keep directors out of jail and help them succeed. Given the stakes, is it surprising that boards don’t do more to measure and strengthen the working relationship between the company secretary and directors.

Effective Governance managing director James Beck GAICD says too few boards regularly review the relationship between the company secretary and directors.“Out of 500 board reviews we have done over 10 years, only a handful of boards have formally reviewed this relationship,” Beck says. “The chair and/or CEO will review the company secretary’s performance, but we haven’t seen enough 180-degree reviews where directors give constructive feedback on the company secretary. The process is usually informal.”

Beck says some boards do not treat the company secretary’s role with enough respect. “I’ve seen boards look at the function as a compliance overhead, remove it, reduce it, combine it with other roles or give it insufficient resources. They treat the company secretary function as an administration process and fail to harness the benefits a good company secretary brings to a company and board.” Of course, the company secretary’s status varies by organisation size and type. A small listed mining company, for example, might outsource the function to save costs. A mid-tier company could blend the role with the chief financial officer, and the company secretary in an S&P/ASX 100 company will typically be part of the executive team.

ASX definition

The ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations clarify the company secretary role, and the latest revision to the principles have added more responsibilities. Recommendation 1.4 says the company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board.

Recommendation 2.6 says a listed entity should have a program for inducting new directors and provide appropriate professional development opportunities, and recommendation 2.2 says the board skills matrix should be disclosed.

Taken together, these recommendations mean more work for the company secretary and greater liaison with directors on induction, training and formalising the skills matrix – tasks that are well established in large listed companies but may need work in smaller ones.

Among their many tasks, the company secretary typically organises board meetings and any general shareholder meetings; is the board’s key adviser on corporate governance and directors’ duties; maintains the organisation’s statutory records and registered address; ensures the listed entity complies with ASX Listing Rules; and the lodgement of overseas announcements.

Beck says the company secretary’s role is a mix of policing and that of a trusted adviser. “They are the person who knows what has to be done by whom, and when. They have the knowledge on policies and procedures, know the key people within the company, where information resides, and a good company secretary can give context to a director on why a decision was made and explain the culture. As such, the company secretary is an invaluable resource for directors.”

Robyn Weatherley AAICD, general manager, governance at United Super, says emerging directors should take advantage of opportunities to build a working relationship with the company secretary in their early board tenure. “Through the company secretary, you can access a world of potential connections within the company and its industry. They are often the most resourceful people within their organisation. The best ones are incredibly helpful.”

Weatherley was head of governance integration and associate company secretary of National Australia Bank from 2005 – 2010. A company secretary by profession, she says emerging directors sometimes misunderstand the role or under-appreciate its value. “Established directors of large organisations with professional secretariats understand the role and value of the company secretary, how to liaise with the company secretary and leverage their skills. For emerging directors, building a relationship with this role should be part of their immersion strategy when joining a new board”.

Weatherley says emerging directors should think of the company secretary as a “safe place” to ask questions that they are uncomfortable or unsure about asking the chair or CEO. “Questions about important matters such as trading disclosure requirements, or simple things that can worry new directors – like, what do I do on my first day on the board, where should I sit in the meeting, can I write notes on the board packs – should go to the company secretary. Getting routine matters out of the way can make new directors feel more confident.”

Board induction

The company secretary has a vital role in the board induction process, Weatherley says. “They will inform you of company and board policies and protocols, and help keep you out of trouble. It could be everything from how to organise travel to professional insurances, share trading policies, the meeting schedule and absenteeism policies. The company secretary is the director’s go-to person in the first three to six months for any board administration issue.”

Weatherley, author of the governance book, Eyes Wide Open, says the company secretary can be the directors’ conduit to the executive team. “In some organisations, the director will go through the company secretary if they want to speak to an executive. In others, the company secretary will go through the chair, or in smaller organisations directly to an executive.”

She says the relationship can break down if directors are not responsive to the company secretary’s needs or if it appears the director is not serious about their role. “If the company secretary asks a director to return something by a date, they need to do so, because there is usually a legal, compliance or good governance reason that dictates the timing. Give the company secretary as much notice as possible about being absent from a meeting because it can lead to the company being fined if it does not notify ASIC in time.”

Weatherley says directors can unwittingly frustrate the company secretary. “A good company secretary has a memory like an elephant because it’s their job to know the detail and be on top of everything. A director who is on several boards might forget about a policy or process that was approved just a few months ago. Or the company secretary has to keep chasing them for things.”

The biggest mistake? “Never complain about a governance grievance during a board meeting if the matter could be addressed offline with the company secretary and resolved. Directors should never hang the company secretary out to dry in a board meeting. It’s unprofessional and disrespectful.”

Weatherley’s best advice to emerging directors: “A company secretary is a significant contributor to the business and its strategy and can guide you in your tenure. Never forget that the company secretary has the ear of the chair and CEO. If a director consistently underperforms, the company secretary has the capacity to pass that feedback on.”