By Jane Valls, Executive Director, GCC Board Directors Institute
Effective corporate governance is all about superior performance and best practices. If we only look at corporate governance as compliance, then it is really just ticking the box and shows that we have not understood its true benefits.
And this is where the board secretary (in other jurisdictions, the title corporate secretary or company secretary is used) has an important role to play. The board secretary really occupies a unique position in organisations. He or she is the key point of contact for the chairman, as well as a central member of the senior management team.
The board secretary bridges the gap between the boardroom and the executive because he or she has privileged access to both. However, the role is frequently misunderstood, sadly undervalued and often overlooked, especially in the Gulf region, and this can result in board dysfunctions and the failure of the good board secretary to deliver effectively.
The role of the board secretary is often considered as a glorified secretary or simply a clerical role. This is a key misunderstanding of the pivotal position played by the board secretary. The high-performing board secretary makes a significant contribution to the delivery of organisational objectives and the effectiveness of the board.
The original concept of the secretary of the board was as a ‘keeper of secrets’ or ‘the servant of the board’. The principal function of the board secretary was ensuring that board meetings ran smoothly, decisions were made and duly recorded, the minutes were produced on time and that all laws and regulations were complied with. The emphasis was on administration and procedure over a more proactive approach.
However, with the development and importance of effective corporate governance, there has been increased focus on the role of the board secretary and a renewed recognition of the importance of the role as the primary point of information and influence between the executive management and the board. “Chairmen and directors are realising that they need specialist skills and technical knowledge, and they are looking to the board secretary to provide this particular expertise.”
“Chairmen and directors are realising that they need specialist skills and technical knowledge, and they are looking to the board secretary to provide this particular expertise.”
The board secretary is now required to be more outward-looking, to be more interactive with major shareholders, advisers and regulators; and to be increasingly strategic by bringing a wider understanding of business and the economic context in which the organisation works.
Most notably, in the UK, the responsibility for developing and implementing processes to promote and sustain good corporate governance has fallen largely to the board secretary. This is recognised in both the UK Code of Corporate Governance and in the Financial Reporting Council guidance on board effectiveness. Both have served to focus companies on board effectiveness and, in turn, how they can be assisted by the board secretary.
Although this guidance applies only to listed companies, it has been seen as international best practice where these standards of corporate governance should be adopted by other companies as far as they are appropriate to the nature and size of the organisation.
Moreover, the dynamics of the boardroom are changing. Chairmen and directors are realising that they need specialist skills and technical knowledge in this area, and they are looking to the board secretary to provide this particular expertise.
The board secretary in today’s world adds value in a number of ways:
It is important that a strong framework of corporate governance is in place, and that this framework is clearly documented and communicated to the organisation. The position of the board secretary enables a holistic view of the governance framework and as a result the board secretary is generally tasked with the responsibility of ensuring that this framework and any supporting policies and procedures are clearly documented.
Supporting the chairman
The board secretary has a duty to advise the board, through the chairman, on all governance matters. Together, they should periodically review whether the board and the company’s other governance processes are fit for purpose, and whether to consider any improvements or initiatives that could strengthen the governance of the company. The relationship between the board secretary and the chairman is central to creating an efficient board.
Board and committee processes
The board secretary plays a leading role in good governance by helping the board and its committees function effectively in accordance with their terms of reference and best practices. Providing support goes beyond scheduling meetings to proactively managing the agenda and ensuring in advance the presentation of high-quality, up-to-date information during meetings.
The objective is to enable directors to contribute and debate fully in board discussions, and to enhance the capability of the board for good decision-making. After the meetings, the board secretary should proactively manage follow-up actions and report on matters arising.
All directors should have access to the advice and services of the board secretary, who must always be independent and act in the best interests of the company. The board secretary should build effective working relationships with all board members by offering impartial advice. In promoting board development, the board secretary should assist the chairman with all development processes including board evaluation, induction and training.
Communication with stakeholders
The board secretary is a unique interface between the board and the management, and, as such, can act as an important link between the board and the business. Through effective communication, the board secretary can enable management to understand the expectations of and the value brought by the board and good corporate governance practices. “With the increased focus on corporate governance, the role of the board secretary has been extended so that he/she is now seen as the guardian of the company’s compliance with legislative requirements and best practices”
“With the increased focus on corporate governance, the role of the board secretary has been extended so that he/she is now seen as the guardian of the company’s compliance with legislative requirements and best practices”
The board secretary also has an important role in communicating with external stakeholders, such as the investors. In fact, the board secretary is often the first point of contact for queries. The board secretary should work closely with the chairman and the board to ensure that effective shareholder relations are maintained.
Disclosure and reporting
In recent years, there has been increased emphasis on the quality of corporate governance reporting and calls for increased transparency. The board secretary usually has responsibility for drafting the governance section of the company’s annual report and ensuring that all reports are made available to shareholders, according to the relevant regulations or listing requirements.
Keeping the board up to date
The role of the board secretary also includes keeping the board informed of new legislation and how it applies to them. With the increased focus on corporate governance, the role of the board secretary has been extended so that he/she is now seen as the guardian of the company’s compliance with legislative requirements and best practices.
Central information point
The board secretary is the central information point for reporting requirements and governance matters. With a crucial role in the quality and flow of information to the board, he or she has a unique influence on the board’s decision-making process. Close to the chair, yet able to bridge the gap between the board and the executive directors, the board secretary is present throughout the range of board and committee meetings, able to guide the chair and the board to the topics that need to be discussed, even if his or her own voice is unheard during the meeting.
As board members come and go, the board secretary is often the longest-serving member present at board meetings, bringing vital knowledge and experience of the company’s history and culture.
Due to the increasing interest in corporate governance, and the increase in governance-related regulations by stock exchanges around the world, some companies have formalised the role of the board secretary as corporate governance advisor with a title such as chief governance officer.
Of course, the focus of the board secretary’s responsibilities will differ, depending on the type of company, whether it is public or private, and also depending on the industry. But no matter what the organisation, the role has expanded from simply ensuring statutory compliance to becoming a pivotal one. The skills of the board secretary can have a direct impact on the effectiveness of the board and the organisation. The board secretary can add real value to their role and increase their impact by bringing commercial acumen, strategic understanding and softer people skills in addition to their already much-sought-after legal and governance knowledge.
Good teamwork between the chairman, the board secretary and the CEO is the key. It is also vital that the board secretary has direct and informal access to all board members and executives. He or she is ideally placed to align the interests of different parties around the boardroom table by gathering information and enabling effective decision-making.
A board secretary cannot perform their role effectively unless the chairman is supportive. The relationship with the chairman is therefore key as to whether or not the board secretary is able to make a full contribution.
The best chairmen empower the board secretary to ensure that the organisation is led, and that business is conducted with the spirit of good corporate governance principles. So, it is essential that all parties understand these principles. Recent corporate crises, particularly in the financial sector, serve to highlight that the chairman is ultimately responsible for corporate behaviour and values.
The board secretary today needs practical knowledge, technical skills and the intellectual capacity to master complex issues, coupled with leadership qualities of humility, as well as the ability to form good relationships with key directors, to influence change and to embed effective corporate governance principles and practices in the organisation.
A high-quality board secretary’s contribution to good corporate governance is clear. However, it is the special mix of leadership, practical knowledge, breadth, depth and diplomacy which makes them critical in supporting the board and its effectiveness.
About the Author:
Jane Valls joined the GCC Board Directors Institute (GCC BDI), based in Dubai, in January 2016 as Executive Director. Jane has over 20 years of international experience in corporate governance and working with board of directors and she is also the Deputy Chair of the Global Network of Director Institutes. She is an accredited Corporate Governance trainer with the International Finance Corporation (IFC), part of the World Bank Group, and is an accredited trainer with the Ethics Institute, as well as being a Certified Ethics Officer. From 2010 to 2015, Jane was the CEO of the Mauritius Institute of Directors (MIOD), one of the leading Institutes in Africa. She was the first Chairperson of the African Corporate Governance Network from 2013-2015, a network which she helped to found, bringing together 17 Institutes of Directors from across the African continent.