04 May 2016
Understanding how company secretaries are perceived internally can help ensure the function is better utilised
Now is an opportune time for company secretaries to promote their contribution to the organisation and revitalise old fashioned and outdated impressions of the role. Since the financial crisis, public and stakeholder mistrust of institutions has fuelled greater awareness of how important governance is. As a result, all types of organisations, in particular those that are regulated (public, private and not-for-profit) are endeavouring to embed good governance.
Company secretaries are the architects of the decision-making process. Although they do not make the final decision, the route by which that decision is made follows the processes and governance systems the company secretary has put in place. They create the framework for an efficient decision-making process that allows a business to navigate potential regulatory minefields with positive momentum.
The company secretary is the in-house regulatory guru. The board and senior management team need to be able to rely on the secretariat’s knowledge of the relevant regulatory bodies and their ability to ensure that organisational strategy is legally compliant.
Being able to provide strategic advice on current and, in particular, upcoming regulation again ensures that an organisation can maintain momentum and a steady course in pursuit of its objectives. The modern company secretary, however, needs to operate beyond the boardroom if the organisation is to benefit fully from their role.
Board-level understanding of the strategic and commercial contribution of the company secretarial function is critical to its on-going success. Research conducted by DMJ Recruitment found that board members consider company secretaries as valued yet understated contributors to the boardroom.
This echos the sentiment of Professor Kakabadse’s 2014 report ‘The Company Secretary – Building trust through governance’, produced in conjunction with ICSA, which found company secretaries are embedded in the process of making boards more effective.
The importance of the role is reflected by increased investment in company secretariats. Over the past 12 months, there has been a 20% rise in senior-level company secretarial vacancies. This growth of the profession is partly a result of more regulation for organisations to contend with and a greater focus on governance. It also reflects the value boards attribute to the strategic and commercial contributions of the company secretary.
Outside of the boardroom, understanding of the company secretarial function and perceptions of the importance of its contribution to the organisation drop dramatically. As a result the secretariat is too often perceived as simply the administrative function for the board. Levels of awareness and understanding of the role are dependent on three factors: the organisation’s culture, its structure and the individuals in the company secretarial team.
The culture of a business (and its sector) can greatly affect the awareness and perception of the company secretary role across the organisation. For example, in businesses with a heavy focus on sales or production, company secretarial departments are often perceived as a ‘back office’ function. This can make it hard for the secretariat to move beyond an administrative remit to a strategic role.
In organisations where governance, regulation and/or process are perceived to restrict growth, profitability and ‘progress’, company secretaries may find that their attempts to deliver a sustainable, long-term strategy meets internal cultural resistance. This resistance can be difficult to overcome and can drive high turnover in these roles (25% of candidates we speak with highlight a lack of internal influence as a reason for leaving).
Frustratingly, this lack of continuity of personnel perpetuates the cultural cycle, reinforcing internal perceptions of company secretaries as administrators. A governance scandal within the sector can provide the catalyst to challenge and change the culture.
Organisational structures, in particular reporting lines, also have a strong impact on the perception of the role. More than 60% of company secretaries who work in departments which report into finance, compliance or legal (rather than directly into the board) find it difficult to separate their remit from under the shadow of the legal and accounting professions.
Semantics further affects perception. DMJ’s research highlighted that for 95% of dual roles the title ‘company secretary’ is a secondary title – typically ‘general counsel‘ and/or ‘finance director’ will precede it. The resulting impression is that ‘company secretary’ is an administrative add-on to these strategic board roles and it is an image not helped in the UK by a lack of understanding of the difference between secretary (PA) and company secretary.
Finally, and of crucial importance to internal perception, is the personality of the company secretary. Those who invest in building awareness and understanding of their (and their department’s) contribution to the organisation beyond the board and senior managers are more likely to find support for their activities
Given the general recognition of the contribution of the company secretarial team at board level, the challenge is to secure influence and operate as a strategic partner across the wider organisation. Communication is fundamental to developing the secretariat’s credibility with and support outside the boardroom.
Creating a ‘trickle down’ flow of information about the contributions that the company secretarial team makes to the organisation through communication with departmental heads and senior managers is a first step. However, it is often through helping the senior management influence the board and understand the context (strategic and regulatory) within which decisions will be made that the company secretarial team can develop allies and influence.
For those outside the boardroom, decision-making processes often appear opaque and distant. Leveraging the company secretary’s understanding of how to communicate effectively with the board, their knowledge of the decision-making process and their ability to provide advice within a regulatory business context can help grow their influence beyond the boardroom.
This kind of effective communication is valuable to the board and operational management. It can improve the retention by strengthening the connection between management and the executive and improve decision making by ensuring the right information is presented to the board in a timely fashion and in the right way.
It can also stimulate better interaction between the company secretary and wider stakeholders, which enables them to keep the board up-to-date with external perceptions of the business – by doing so, potential issues can be addressed before or during AGMs.
The profession has already evolved rapidly over the past five years as organisations have responded to regulatory pressure and media scrutiny of their behaviour. This trend looks set to continue. The regulatory environment is becoming ever more complex and boards are being held accountable for the effective and socially responsible governance of their organisations.
In this context, commercially minded company secretaries have every opportunity to grow their influence across the organisation. However, to achieve this company secretaries need to define the strategic contribution they can make across the organisation, communicate effectively with all stakeholders and take ownership of their space.
Over the last few years ICSA: The Governance Institute has taken big steps forward for the company secretarial profession, not least through the recent addition of ‘The Governance Institute’ to its name. However, there is only so much a professional body can do.
Company secretaries need to take responsibility for: 1) making themselves strategic partners to the board; 2) being an invaluable bridge between the wider organisation and the board; and 3) ensuring the organisation maintains its license to operate with wider stakeholders.
Improving awareness and understanding of the valuable contribution company secretaries can make to an organisation is a long process; however, the conditions to evolve both the role and perceptions of it have never been better.