30 September 2015 by Conor Ryan
When it comes to the really big corporate scandals, sometimes one could be forgiven for asking the really obvious question…just what were they thinking? Case in point here is the latest scandal at VW, where management made decisions (on car emissions data) that would ultimately have a catastrophic impact on the organisation as a whole. And why? Because unlike the board which has (or should have) a more holistic, balanced and independent decision-making process, management could not see, chose to ignore or were perhaps just ignorant of the wider and more profound implications of their choices. So yes, sometimes boards get it very badly wrong, make poor or ill-informed decisions (and the jury is still out on what the VW board did or didn’t know), but just as dangerous is the board that is not aware that an issue exists in the first place.
For many large organisations, the role of the company secretary and that of the secretariat function takes place not just at board level, but also at management level through the provision of secretariat and governance support to the management committee regime. This means that company secretaries and their reports are often well positioned to understand the rationale and purpose behind many of the decisions taken by management.
Ideally, with an independent reporting line into the chairman, the company secretary can be uniquely placed to challenge management thinking, particularly, if in their view, such thinking would run contrary to the governance standards expected by the board (remember, the UK Corporate Governance Codes requires that the company secretary be responsible for advising the board through the chairman on all governance matters).
Board members and management often have a lack of awareness of the ways in which the company secretary supports an organisation in its decision making. This is a pity because boards and management may miss out on making full use of the skills, knowledge and experience at their disposal.
Company secretaries are often the longest serving members present at board meetings, and so are a vital repository of company history and culture, and a guarantor of continuity. Their knowledge is invaluable in knowing how and why certain decisions were taken.
Board members are appointed so as to add value to a company’s strategic decision making and the company secretary is quite literally the oil that keeps a good board working. He or she keeps dialogue open not just between a chair and a CEO (a relationship that must function for the board to be effective in its role) but also with the other directors. That’s why it’s vital that company secretaries have both direct and informal access to all board members, both executive and non-executive.
The role of the company secretary is an important and unique function
The breadth of the company secretarial role continues to develop both internally through its ongoing support of the board and management and outwardly through the investor engagement and corporate communications agendas.
Sometimes you just need someone in the right position, with the right experience who knows the difference between something that is legal and something that is right!