Today, the role of the company secretary is almost unrecognisable to what it was in the not-so-distant past. Then, company secretaries were seen as administrative assistants to the board, with note-taking and tea- making being their chief tasks.
While administration was a core part of their activity, it was unfair even then to view them as playing such a minor role. They also carried out significant statutory duties, such as ensuring the business complied with company law, maintained certain statutory registers and made the necessary filings, such as annual returns, financial statements, and certain forms with respect to changes to share capital, for example.
One of the biggest changes in recent years has seen company secretaries take on the responsibility for developing, coordinating and implementing processes to promote and sustain good corporate governance.
Nowadays, they provide a valuable service as a repository of corporate knowledge, regulations and good governance to the board, which can sometimes be overlooked. They play an often-indispensable role in supporting the effectiveness of the board, and in assisting the chairman and CEO in their duties too.
The arrival of the pandemic in 2020 necessitated that they step up and provide additional value and support to the board, which has been in almost constant crisis mode for the last two years. This has required company secretaries to broaden and evolve their administration and governance remit to become facilitators and enablers of critical board processes.
Supporting the board and particularly the chair
The health crisis has obliged the company secretary to work particularly closely with the chairman in supporting them on all governance matters and other aspects of their work in facilitating an effective board.
An important part of this involves both periodically reviewing whether the board and the company’s other governance processes are fit for purpose and consider any improvements or initiatives that could strengthen the governance at the organisation.
Enabling four lines of sight
In their role as enablers, and supporting the chairman, company secretaries must ensure boards continue to focus on having four lines of sight:
- Oversight Boards have a fundamental legal responsibility to provide oversight and accountability, so they must have the right processes in place to achieve this. Referred to as the board’s ‘fiduciary’ responsibility, the board needs to make sure that the business is appropriately stewarding the resources entrusted to it and following all legal and ethical standards.
- Insight Effective boards understand the company, the financial engine and competitive edge of the organisation, along with the external business environment. This insight drives a more objective and enabling assessment of performance and strategy.
- Foresight The ability to anticipate, to see what is coming and the future forces that will impact the competitiveness and sustainability of the business is critical to effective understanding of risk and development of strategy.
- Hindsight Effective boards can bring significant company knowledge, the hindsight to remember previous initiatives and reflect on the good, bad and ugly learnings from the past.
By helping to enact effective processes here, the company secretary can make sure that each perspective adds value, enabling effective decision-making by the board.
Facilitating performance reviews for the board
Company secretaries must work closely with the chairman to facilitate performance reviews of all on the board, to ensure they are fit to lead the organisation into the future. After the last torrid couple of years, some governance processes, like regular reviews of those on the board, have been deferred. Now is the right time to make sure these reviews happen as boards start to come to terms with the ‘new normal’.
While some directors have demonstrated they have been ‘leading lights’ during the pandemic, by spotting new opportunities for their organisation, others haven’t.
Take the CEO: have they identified a once-in-a-lifetime opportunity to transform their organisation to ensure it thrives? Unfortunately, some CEOs, under significant strain, can close down dialogue with the board and present ‘oven-ready’ decisions at board meetings. Others have experienced uncertainty paralysis, delaying decisions, and therefore end up being driven by events rather than driving them. Also, some CEOs have focussed too much on the ‘present’ in the crisis and not looked at the future direction, which can have negative long-term implications for their organisation.
But it’s not only about evaluating performance over the last two years. As the crisis shows signs of easing, boards must consider if their current CEO and directors are best placed to lead the business out of crisis mode and into future growth. Organisations need to ensure they have a CEO and board that is fit for the future. Every board wants assurance that their CEO and all the directors have the appropriate skills and are adding value, while effectively meeting their objectives.
To this end, the company secretary needs to support the chair in helping to deliver a 360-degree performance review for all on the board, one that provides an objective assessment. The board, CEO and any direct reports must reflect and provide feedback on the performance and development needs of the director being appraised. This requires qualitative and quantitative research, based on interviews, either face to face, or on a videotelephony platform, and an online survey.
At the end of the review process there must be clarity on the next steps for the director, with deliverables agreed by all parties. These can then be revisited and evaluated at a later date to check on progress. The company secretary should ensure any agreed training is organised and takes place, as well as help with the transition of those no longer right for the role.
Helping succession planning
Prior to any transition, the company secretary has a role to play in facilitating succession planning for all on the board, which involves helping to identify and nurture future CEOs, chairs and directors.
Planning for CEO succession, for example, should take place at least once a year. However, for many boards the default option is ‘go to market’ and succession planning is not something they consider until time is not on their side, when the current CEO comes towards the planned end of their term, reaches retirement age or is no longer seen as the right person to lead the company. This potentially leaves the business without a clear leader, which could be disruptive to the organisation, impacting, in particular, on business continuity.
The appointment of a new CEO or director is only the first part of the succession process. The second stage is the all-important transition – the transfer of roles from the outgoing to the incoming CEO or board member.
Managing transition
The company secretary must play a key role in enabling an effective transition process – one that is well-planned, or the effort put into the succession will be put at risk. Any failure of planning here could contribute to the possible failure of the new CEO, or director, to effectively transition into the business and make it more difficult for them to deliver top performance. According to some estimates, between a third and up to half of all CEOs leave after 18 months, which is very costly for organisations, both in the short and long term. There is a higher probability of failure when the transition process is neglected.
A well-thought-through transition strategy, devised and implemented by the company secretary and the board, will help ensure the new CEO, or director, is effectively inducted and is able to add the maximum value at the earliest opportunity.
Inducting to the board
The company secretary must become an enabler when it comes to the onboarding or the induction of those to the board during the transition period and beyond.
“THE COMPANY SECRETARY MUST PLAY A KEY ROLE IN ENABLING AN EFFECTIVE TRANSITIONPROCESS — ONE THATIS WELL-PLANNED, OR THE EFFORT PUT INTO THE SUCCESSION WILL BE PUT AT RISK”
What they need to avoid at all costs – and used to commonly occur in the past – is depositing a wealth of reading material on the new director, including documents such as codes of conduct, strategic plans, annual reports, etc, and expect them to quickly get on with the job in hand.
Working closely with the board, the company secretary needs to make sure a well-planned and thought-through induction process takes place, which involves ensuring formal governance training is delivered so the new starters learn about liabilities, risks, financial competence, including how to be effective in board meetings. They should be involved in setting up a buddy system with an established director so the new board member can learn about previous decisions, and how things work. Also, the company secretary must arrange a programme of visits and experiences so the incoming director can really get under the skin of the organisation. At the conclusion of the induction, they should undertake ruthless feedback so the induction process can improve over time.
Assisting in risk planning
The pandemic revealed risk processes at many businesses that were academic, impractical and, in some cases, simply unworkable. Too many boards were blind to critical business risks. The company secretary needs to help facilitate risk planning by the board to evaluate future risk. They must work in tandem with the board to challenge their understanding of risk and, therefore, their risk appetite, and ensure they effectively prepare for future threats. This approach will help enable the board to spot and turn any future risk to their commercial advantage and secure the long-term survival of their organisation.
Time to outsource the company secretary role?
Today, it can be difficult for the board to source a company secretary with not only the required governance experience, but the enabling and facilitating skills and expertise in critical board processes. When looking to appoint a new company secretary who is fit for the future, or support for an existing one, outsourcing needs to be seriously considered. This way, organisations can select those with the skills and experience they need to help the board navigate a challenging post-Covid world without compromising on quality.
Additionally, outsourcing provides flexibility, ensuring organisations can focus the efforts of the company secretary on the areas and processes they need them to deliver on to ensure good governance in a fast-changing world. The board will also find outsourcing more cost-effective, compared to employing
a full-time, permanent company secretary.
Next steps
As the pandemic eases, but uncertainty remains, boards require company secretaries who can add value in supporting critical board process in addition to their traditional governance role, to help ensure an effective board. Ambitious company secretaries, who haven’t already, need to broaden their role to become facilitators and enablers in the areas of oversight, through to foresight, director reviews, succession and transition planning, inductions, and risk strategy.
For those boards struggling to source the value-adding skills they need from a company secretary to support them in what remains a challenging short to medium term, outsourcing the function is an important consideration.
