Contemporary capital markets require transparency and board independence. Increasing regulatory obligations of quality and timeliness for corporate disclosure devolve to the company secretary in order to instil investor confidence. The role is responsible for administration duties and advises the board and senior management and the role has been elevated through modern market transparency demands. The company secretary’s formal and informal boundary-spanning activities are deemed important to achieve effective corporate gate-keeping responsibilities and this article will focus on a practical review of these activities.
Role, responsibilities and boundary-spanning activities development
The development of the role is contingent on many factors including increased transparency requirements from regulation, board dynamics, the individual director relationships, and the specific characteristics of the company secretary. Robertson in her book looked at the history of the role and explained excellence in corporate governance is likened to sporting team excellence. ‘Performance needs to be focused both internally and externally’.2 While directors/senior officers are regulated under the Corporations Act 2001(Corporations Act), the HIH royal commission report on the failure of HIH Insurance3 raised concerns that the legislation does not consider the ‘commercial practicalities and development in regulating the individual below board level’.4 CAMAC claims there has been an inadvertent broadening of consequences for those subject to the legislation. Senior officers must be fully aware of the wider net of responsibilities and potential regulatory ramifications of their corporate role.
The real discretionary power and unique expectations of the role are dictated by the individual company constitution, board dynamics and the company secretary’s technical, commercial, and social skills.
There is no legal definition of company secretary, nor any requirement for them to have any particular qualifications, however, the Corporations Act provides a fractured framework of the scope of responsibilities and powers of this officer. Section 188 contains the prescriptive list of duties the company secretary must not breach. Section 129 allows a person to assume the officer (director/company secretary) they are dealing with has customary authority and is performing their duties properly on behalf of the company. The real discretionary power and unique expectations of the role are dictated by the individual company constitution, board dynamics and the company secretary’s technical, commercial, and social skills. Recommendation 1.4, of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (2019) specifically acknowledges the company secretary’s role in supporting the board’s effectiveness, stipulating accountability to the board via the chair for all matters to do with proper board functioning. The role involves guiding the chair and board on their responsibilities under the rules and regulations to which they are subject and on how those responsibilities should be discharged. As a trusted adviser, the role includes being a sounding board to the chair and directors on any issue of concern and where applicable, a discreet but challenging voice in relation to board deliberations and decision-making.
Company secretaries work both internally and externally, monitoring and communicating information to key stakeholders. They are to be accessible to each director and facilitate their induction and professional development. They also advise on governance matters, monitoring policy and procedures. Today companies must ‘preserve a social licence to operate’ for long-term sustainability5. This reflects a growing need for a change in focus by directors to govern and cater to a wider group of corporate stakeholders. The idea that shareholders are first above all other stakeholders is unlikely to carry social licence into the future due to digitisation of social media. Digitisation has provided another layer of scrutiny of corporate behaviour that the company secretary must manage.
Boards and company secretaries require governance scaffolding to support financial performance and plans with a broader risk management framework. Evolutionary governance frameworks include the review of culture, customer and employee engagement, safety, community welfare, indigenous impacts, climate change and cybersecurity. Importantly, the risk appetite and risk management processes should be continually reviewed. The forces of globalisation and rising technological innovation are requiring companies to compete ever harder to prosper with the responsibilities and business acumen required of the company secretary also increasing. Companies operating with either a domestic or international parent implies the actions of the company secretary will have additional accountability consequences.
The role of the different directors (executive versus non-executive) is affected by an asymmetry of information; no such distinction exists in the legislation and the amount of information they can realistically expect from management will differ. Fundamentals around the boardroom are facilitated by the company secretary and include openness between board members. Executives operate in a complex environment with increased pressures to deliver short-term gains in an ever-changing world of technological developments, a globalised economy and raised expectations of stakeholders. The company secretary has a further role to play in assisting directors who hold directorships across multinational organisations by helping them understand and comply with local requirements. The use of classifying entities by activity such as regulated, trading/non-trading, and dormant allows a risk profile to be allocated and a corresponding governance framework adopted. Given that there is little coordination of legislation in multiple jurisdictions, this further explains the growing complexity of the role.
Role development insights indicate that the company secretary responsibilities and experiences vary depending on board dynamics, the size and type of organisations, role duality and multi-jurisdictions they work within. The processes for not-for-profit (NFP) company secretaries are similar to their counterparts in public corporations, but with the additional accountabilities to beneficiaries. The supporting role performed by the company secretary regarding the appointment and induction of responsible persons to boards/management is increasingly more critical to governance in NFP organisations. For government owned corporations (GOCs), they manage a board that experiences further dynamics in turnover of board members based on changing political environments. GOC company secretaries have unique challenges, including amplified complexity during times of transitional politics, which require increased consideration of relationship management and boundary-spanning activities.
Activities, skills and boundary-spanning capabilities
The notion of ‘organisational space’ refers to the space between firm internals (executive team and internal directors) and firm externals (independent external directors), which is created by the asymmetry of company information between these two groups. To navigate this space, the company secretary facilitates dialogue by information brokerage processes such as setting of board agendas, ensuring the most up to date sub-committee reports and financials are presented, seating arrangement of directors; and allocation of air time to each agenda item. Their role as information broker opens up the potential for the company secretary to influence the ordering of space inside the boardroom. The processes for acquiring information in board meetings will vary due to the differences between board members. Informal processes will change the levels of collaboration and control that exist between directors and based on the existing protocols of distance and involvement formed with new and existing relationships. The company secretary can steer the processes of the board. This suggests that this role has a substantial impact on board performance. Evolving responsibilities resulting from changes in the regulatory environment and internal dynamics such as director turnover and conflicts between directors require company secretaries to command skills such as confidence and the ability to effectively network.
The role is influenced by the nature of the industry and more subtly by the experience of the person in the role and the historical development of the role as the organisation progresses and evolves. Competencies and social skills enable the company secretary to operate on many levels such as assisting with recruitment of new board members and the selection of how and what information is presented at board meetings. Both aspects of their skills, technical and behavioural skills are likely to impact critical decisions. The company secretary role is expanding, where there is more discretionary space and decision power that is often incidental to performing this role. For example, through the evolution of the market economy, the role has taken on greater importance due to increased legal-compliance work, disclosure of corporate information, and the corresponding need to maintain a CSR reputation.6 The inner sanctum of board workings, processes of the chair, and interactions with the company secretary remain invisible to all except those who perform these senior duties. Appointed by the board, acting independently of the executive office and attending all board meetings (whereas auditors and internal/external legal officers are excluded) allows the company secretary to perform a unique boundary-spanning role in pursuit of their gatekeeping duties.
Company secretary responsibilities and experiences vary depending on board dynamics, the size and type of organisations, role duality and multi-jurisdictions they work within. Role construction varies due to the ongoing expansion of market expectation for transparency in organisations, the individual skills and the internal dynamics such as board turnover and the imbalances of knowledge and time between executive and non-executive directors. Over the last five years, the role has expanded regarding both responsibilities and knowledge required to support board processes. The role evolution and market demands have necessitated company secretaries to build a greater bank of knowledge, technical expertise and importantly the soft skills of emotional intelligence for stakeholder management. Challenges in role construction are assisted by clear articulation of where the role sits in the governance framework. Board members will possess different levels of business knowledge, depending on their access to the business and the company secretary’ allocation of time to them. Board member’s accessibility to the business nuances and assistance provided by the company secretary can vary widely between part-time, full-time, internal, and external directors. ‘Organisational space’ opens up the company secretary to be a conduit in the transfer of information. The boundary-spanning capabilities are significant in coordinating and managing the board dynamics and its flow of information. Skills of spanning and trading information across levels and working within the ‘organisation space’ is an important trait enabling the company secretary to support the board and influence board governance. Role construction requires higher-order social skills to manage the relational dynamics of boards and managing knowledge acquisition necessary for board support. Over time, the secretary can influence and drive the board’s collective knowledge.
Often the company secretary has the longest history with the organisation and a wealth of corporate knowledge that others need to rely on. The revolving door of board members, management, and political dynamics (GOC’s only) confirm that the secretary manages multiple relationships. The contemporary company secretary is to be seen as an influencer that acts as a governance agent in and around the board processes. Given the speed of financial market reaction to key corporate information, the company secretary has the opportunity to develop efficient corporate governance processes utilising technology and agreed governance frameworks to fulfil their compliance role as a governance agent. Company secretaries can no longer see themselves as just a traditional administrative and regulatory compliance. This role is best positioned to ensure that all information is considered, thus acting as the ‘collective knowledge bank’, and ‘part conscience’ meaning that together the board acts as a ‘collective conscience’ through board processes and the assistance of the company secretary.
The boundary-spanning capabilities and informal processes of gaining and sharing information as an ‘information conduit’ are critical to supporting the information processes for board management. These unique capabilities enable them to put the pieces together or suggest discarding actions that do not align with the organisation’s obligations and norms. Diplomatic abilities are paramount to meet stakeholder expectations under sometimes conflicting circumstances. The informal activities of the company secretary enhance their effectiveness as administrator and governance gatekeeper. Company secretaries, through developing informal working spaces, work across all organisational levels to perform the role at a tactical level. Using the developed governance space allows them to facilitate administration matters and manage boardroom information flows.
Role performance through construction: Beyond humble clerk to strategic adviser
Company secretaries understand the professional backgrounds of each board member, dedicating time to find out their individual preferences regarding how papers are to be written and the information detail required to provide clear advice in presentations. Mannerisms can change from formal to informal ‘by reading and understanding the board.’ For example, individual board members seek out the company secretary post-board meeting for further explanation to clarify events and statements. Emotional intelligence ensures processes are in place for the board to be comfortable with board processes and ultimately provides outcomes that the board can operate within. Being able to anticipate and manage the expectations of the various board members and the CEO is considered important in the successful delivery of relevant board papers and advice. This can range from small and simple things such as the arrangement of tabs in a certain way in a board pack or anticipating the latest corporate responsibility trends in multi-jurisdictions.
Company secretaries are privy to many conversations around the board table and need to be the keeper of secrets. They are often approached by many different officers of the company and act as a sounding board for ideas and confidential advice. Higher social order skills are necessary characteristics for the role. Competent and trust themes assist role construction into an advisory role. Company secretaries with similar characteristics and experience as a board member in other organisations allows them to function at a higher level. Relationships between the chair and the CEO can be complex and company secretaries recognise and prioritise their independence. Company secretaries must be vigilant in making this distinction with management that quite often doesn’t understand the duties of the role: that is one, management role as head of company secretariat and two the statutory role as company secretary.
Organisational lines and working the developed space
The inner sanctum of board workings remains invisible, as do the activities and perceptions of how the company secretary can be a major influencer in facilitating board relationships. The company secretary uses the trading, knowing and sharing processes to ensure the board is fully informed by providing all available information rather than ‘selected information’ by management. The broad knowledge and skills of company secretaries assisted board decisions with timely information. The perceived organisational space allows them to use their skills and abilities that are built up over time to know what is ‘going on’ in various parts of the organisation. The ability to move across, below, and around boundaries is an important enabler to the work of all the company secretaries. It requires the ability to perform the role with all levels across the organisation, involving conversing, persuading, and coercing people. The company secretary negotiates with various parties to acquire information for board consideration and decisions. The board is always about strategy, but it is important to define how far they are going down in the business.
Company secretaries need to spend time on governance structure, to what level the board operates at and what level the management operates at: the boundary issue. A breadth of awareness, as well as the depth, is required because people rely on the company secretary to join the dots and see things and put their hand up on these issues as others don’t see because they don’t have that boundary-spanning capability. As a member of the executive leadership team, company secretaries are responsible for not just their area, it’s an all one team approach and as a consequence it’s understanding, it’s what’s going on around the entire organisation as opposed to just their sphere of activity. Company secretaries can experience roadblocks when it comes to the brokerage of information. These consist of executives below the board not providing correct protocols by way of giving enough time for papers to be reviewed and considered before a meeting. These roadblocks are overcome by using various contacts to ensure the information is available and presented in accordance with agreed processes. Decisions can be delayed until the appropriate time is dedicated to the issue presented for board consideration.
Evolving role construction and challenges
Company secretaries, through both necessity and desire, have raised the bar in technical/business skills and social skills required to effectively perform their role. Secondly, the company secretary acquires, assimilates, and appropriates knowledge to all necessary officers using informal processes: executive and non-executive; external and internal parties; junior and senior officers. Due to the advanced skills and characteristics and the establishment of relationships built up over time, the company secretary has evolved into a significant role that has sufficient depth and breadth to make an impact on board effectiveness.
The company secretary adds value when writing the minutes as they act as an effective information conduit assisting executives to follow processes and information protocols. The role entails aligning processes and information for effective board functioning. It often requires reviewing and rewriting the information presented so the chair does not have to make many changes. They can use these higher-order social skills to obtain information across various levels of the organisation. From this top-down view, they are able to provide business advice and do this by ensuring they have complete information and that nothing critical is omitted for board decision-making: they act as a bridge to ensure the board report is at hitting the right level for what the board is going to be asking at a strategic level.
Business knowledge of operations and established business relationships allow the company secretary to assist management to navigate the board and present appropriate information to the board. The process challenge is to not actively be running the board meeting or making the decisions; instead, act as a ‘conduit’. The role is being the keeper of information and that maintenance of board confidence is paramount. The hardest thing to do is sometimes for the company secretary to step back and let the board have their meeting. Board members are the ones with the knowledge and understanding and are assisted by the company secretary putting forward proposals and recommendations.
Regulation mandates and guides corporate governance by defining directors and officer’s roles. Informal processes will impact corporate governance effectiveness. Using the inner workings and activities performed as a boundary spanner the company secretary role is underpinned by the higher-order social skills and strategic skills at the individual level. The company secretary’s diplomacy skills, relationship management, and preferences established with the chair and the CEO assist them in developing the role. This role construction is important to understand for the information processes (both formal/informal) necessary to ultimately support board processes. The role responsibilities under construction can be represented by a circle that is not static. The competencies and trust, the relationships formed over time, and the organisation norms all contribute to the development and boundary-spanning capabilities of the role. The higher-level emotional intelligence skills, professional background, and extensive business experience of company secretaries and relationships formed enable them to build capacity as a governance change agent. Company secretaries must be mindful of the additional management of stakeholder’s expectations both internally and externally. Company secretaries make a significant contribution to their organisations through their skills, managing the relationships established both formally and informally. The skill of spanning and trading information across levels and working with the ‘organisation space’ is a significant factor enabling them to support the board and influence board governance.
Company secretaries acting as strategists, strive to add value through their ‘trusted adviser’ reputation constructed over time.
Within Australia, the role has evolved into an important advisory role due to the following factors: development of higher-order social skills of the individual, the facilitation of formal and informal processes of brokering information through the organisation norms and the organisation space that opens up capabilities to span the organisation to acquire knowledge. Company secretaries acting as strategists, strive to add value through their ‘trusted adviser’ reputation constructed over time. The knowledge and experiences of this senior officer suggest many of them are well prepared and experienced to bring good sense and judgement by moving into a board position. This capacity to be an information conduit influences and drives the board’s collective knowledge through board agendas, board meeting management, board member induction and time allocated to executive and non-executive director support. The information presented and in what form and how much airtime assigned, ultimately impacts board governance processes and emphasises the thoughtful and significant contribution the company secretary role provides as a governance change agent. This role is performed by using diplomacy skills to span various organisation levels, moving in and around the boardroom and brokering relationships in order to assimilate information relevant for board decisions.
The increased expectations and pressures on the role have evolved with the changing landscape of regulation and market expectations for organisations to be both profitable and maintain a corporate social responsible reputation into the future. Company secretaries experience periods of transition, through changes in business model and changes in board composition, confirming the theme that the behavioural dynamics of board preferences contribute to the role under construction concept. This ongoing revolving door of board turnover illustrates one of the many relationship dynamics that the company secretary manages on a regular basis. Often the company secretary has the longest history with the organisation, and other executives rely on them for their valuable transfer of corporate knowledge.
Company secretaries require higher-order social skills of emotional intelligence and diplomacy attributes which can be likened to these skills required of a United Nations Secretary. Company secretaries are logically positioned to inform the board through this ‘collective knowledge’ of the organisation. The acknowledgement of the role as a ‘knowledge bank’ of business history together with being a stable employee affords the company secretary a unique position to offer insights not obvious to board members. Company secretaries play a prominent role in the succession planning of board appointments due to their experience and awareness of the business accumulated over time.
The company secretary is ‘part conscience’ to the organisation and helps to uphold the collective knowledge in the absence of other actor(s) performing the role. An organisation’s governance is assisted by the actions of all individuals and supported by the company secretary in the continual education of legislation development and history of the organisation. The company secretary is naturally positioned to inform the board through this ‘collective knowledge bank of the organisation’ affording them a unique position to offer acumen that is not currently present at the board table.
Those performing a dual role, whilst being a ‘safe pair of hands’ must ensure the fingers of the left and the right hand do not intertwine when working as both management and governance officer. The holistic approach applied to the examination of the role of the company secretary includes both the external and internal factors to understand the current role. The higher-order social skills of diplomacy, emotional intelligence in addition to technical skills and informal activities of boundary spanning capabilities of the company secretary are all essential activities for board support. An organisation’s governance is assisted by the integrated efforts of the ‘behind the scenes’ professional, the company secretary. The elements of the role of a contemporary company secretary can be described as:
‘It’s a huge long list in terms of all the various social and technical skills you need in running your own team, boundary-spanning the organisation for information and forming relationships, the people management side and your duties under the Corporations Act. You’ve got to see what’s coming over the horizon as you know, you’re a futurist and you support the chairman, you’re also part of that company’s conscience so you’re an ethicist. You’ve got to plan every inch of your life, if that’s not done properly you will read about it on the front page of the financial review if you make a mistake. It’s being the soul of discretion, the sounding board, the trusted adviser. It’s really quite a fascinating role.’