A partner to the chair of the board, and a bridge between the board and shareholders, the corporate secretary has privileged access balanced by an emphasis on administration and procedure. Bureaucratic perceptions have been hard to shake off, but this corporate function is increasingly regarded as strategic and indispensable.
We spoke to Paul Marcela, formerly the Corporate Secretary of Dow Corning and now President of Governance Partners Group, a provider of external corporate governance services, about how this role has evolved.
Q: What are the primary responsibilities of a corporate secretary today?
A: The most prominent function for corporate secretaries is what I call board support—advising the board on governance and corporate best practices. They work with the chair of the board to prepare for board meetings. It’s not uncommon for boards to become highly political, so the corporate secretary needs to deftly manage the meeting agenda with the chair to achieve strategic outcomes. The corporate secretary's notes will be the source of an action list for executive management so that board directions are incorporated into business activities.
Corporate secretaries also oversee the fiduciary duties that a board has to shareholders. They are the bridge between these parties, ensuring that their rights and interests are respected. Without this direction, a board may err in its responsibilities, and this would generate a great deal of tension.
Additionally, having a responsibility to create and sustain a dialogue between shareholders and the board, corporate secretaries of public companies often play a role in annual shareholder meetings, ensuring that the process is properly managed. And this may include engaging with a proxy service firm, like Mediant, to streamline annual meeting and proxy communications production, distribution, voting, tabulation and analytics.
Q: What strategic concerns face the corporate secretary?
A: The rise in shareholder activism has caused the role to become a lot more dynamic and strategic. Activist proposals tend to command more respect than in the past, therefore the corporate secretary must consider how to properly reflect shareholder proposals in proxy statements and constructive ways for management to respond.
Another challenge is to anticipate lawsuits. These are a fact of corporate life, particularly in the U.S. Here the corporate secretary’s role overlaps with the corporate lawyers’ role, primarily in lawsuits where plaintiffs are attempting to pierce the company's corporate veil—a legal action to treat the liabilities of a corporation as the liabilities of its shareholders—and get at shareholders' assets. Fastidious governance practices, including careful minuting of board discussions, present a good defense. Demonstrating good corporate governance practices, with minutes that make it clear that the board did all it should do to operate the company separately from shareholders, will often be sufficient to deflect this kind of plaintiffs’ legal strategy.
Q: Taking all of this into account, what is the importance of the corporate secretary to the board today?
A: Oftentimes a board may not realize that the reason everything is running smoothly is because the corporate secretary is doing a good job. Typically, they will be quiet in meetings, diligently capturing everything that goes on. However, a skilled corporate secretary will understand the company strategy, be on top of salient matters of corporate governance, and will have anticipated board politics.
Q: Do listed companies of all sizes really need a corporate secretary?
A: Frankly, yes. First, it’s a legal requirement, but it doesn't follow that the person who holds the office has the requisite background and skills. It’s usually not a full-time position, even in large companies, so smaller firms are especially prone to thinking that the expense of an experienced professional is not justified.
I recommend seeking out an external provider that offers fractional officer roles. This is common in the U.K. and Commonwealth nations, although quite rare in the U.S. The alternative in the absence of a professional is to ensure that whoever holds the office of corporate secretary has ready access to expert advisory.
Q: Which organizations provide expert, independent advice?
A: We have three. The Society for Corporate Governance is the premier professional association of corporate secretaries. The National Association of Corporate Directors (NACD) and the Private Directors Association provide services to directors of public and private companies. I should disclose that I'm a director and officer of the Private Directors Association and I have been a director of the Society. These organizations provide education and training, so they are good resources if your company needs to improve its understanding of the corporate secretary role.
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