16 March 2015 by John Burns
Our colleagues in the UK have a very useful document that is essential reading for all company secretaries. The UK’s Financial Reporting Council (FRC) guidance on board effectiveness defines the role of the board as providing “entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed.” And, as we know, the company secretary’s role is crucial in this regard.
There has been, and still remains, a misunderstanding of the importance of the role of company secretary by some executives, chairmen and non-executive directors (NEDs). In the past there was a perception that the company secretary had a background role, responsible for dealing with detail and administration. These days, and especially in larger companies the company secretary makes a significant contribution to board success by ensuring the strategic alignment of teams and agendas, disseminating critical information, facilitating dialogue and enabling effective decision-making. The company secretary is a de facto referee within the enterprise.
Not a comfortable place
The guidance also says, “An effective board should not necessarily be a comfortable place. Challenge, as well as teamwork, is an essential feature.” The company secretary provides a vital bridge between the boardroom and the executive; an independent counsellor with sufficient authority to provide challenge when a company is failing to meet its obligations or being governed incorrectly.
Also a team player?
Company secretaries have a unique and highly strategic role, facilitating the delivery of organisational objectives and, often the longest-serving member at board meetings, they have a wealth of knowledge about company history and culture. That makes the company secretary a player in the enterprise as well.
…and a coach?
The company secretary is a key contact for NEDs, ensuring information flows, facilitating good working relationships and looking out for their interests in terms of the risks and liabilities they take on as non-executives. As the senior independent director and other NEDs can be internationally based and sit on a number of boards, the company secretary is their link to the chairman. Company secretaries build relationships with each NED, acting as their trusted adviser and dealing with their induction and training.
Ensuring good quality analysis and information
Good quality board information is crucial to board effectiveness and decision-making and it is easy for boards to be overwhelmed by data. A key role of the company secretary is to review board papers to make sure that they are clear and understandable. After all, if the company secretary, as a member of the executive team, doesn’t understand a paper, what chance is there for a part-time non-executive?
Diversity in board composition is an important driver of board effectiveness, creating a breadth of perspective among directors, and reducing the risk of ‘group think’. Company secretaries often have cross-sector experience and a good range of contacts. With their experience at board level, they are themselves a significant pool of skilled and experienced potential non-executives who are often overlooked.
The Senior Independent Executive
The company secretary has a critical role – as both player and referee - at the centre of the company; one as a member of the senior executive team and another as the Chairman’s chief of staff, supporting and facilitating the effective functioning of the board. In other words, the Senior Independent Executive of the company.