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Company secretarial health check

23 August 2016 by Tasneem Saiki, Gurdeep Rai and Natasha de Soysa

Company secretarial health check - read more

Maximise the effectiveness of your company secretarial function

A high-performing company secretary is critical to the effective running of the board. Those in the role are also a trusted adviser to directors and a facilitator of good governance throughout the organisation. Although internal and external board evaluations are now standard practice, it has historically been rare for firms to extend the same degree of evaluation to the company secretarial team’s own capability – but this is changing.

In financial services, for example, the Senior Managers Regime (SMR) requires the office of the chairman to be adequately resourced. This has led firms to undertake a more detailed health check of company secretarial operations. Other sectors are also embracing this approach as the Financial Reporting Council (FRC) and other bodies emphasise the importance of governance and recognise the role of the company secretariat in achieving this.

Health check framework

Deloitte has produced a model for facilitating a company secretarial health check. When working with company secretaries to review and enhance effectiveness, four categories should be considered: people and organisation; board and committee management; compliance and processes; and performance and communication.

1. People and organisation

Start with strategy: Company secretarial teams often have objectives to be best in class. This means meeting reporting deadlines and adhering to regulatory requirements, as well as providing high quality service to stakeholders. Those that stand out also align their long-term departmental plans to their firm’s strategy, considering how the skills, resourcing and priorities of the team need to evolve to support that strategy.

Clarity over remit: Company secretaries may have an opportunity to define a governance role broader than board-level support. Many are embracing this with the emergence of chief governance officer roles. A typical challenge is managing any mismatch between the expectations of the business, the agreed articulation of what the company secretarial role entails and the resources and funding allocated to it.

Sometimes company secretaries are unclear about their position within the three lines of defence risk governance model, the extent of policy oversight they are expected to conduct and the nature of relationships with subsidiary and overseas teams. Without addressing these uncertainties, it will be challenging for stakeholders to understand fully the extent to which the company secretarial team is delivering on its strategy and objectives.

Develop the next generation: Just as the board and the nomination committee examine succession planning for directors and the senior executive team, the company secretarial team should also keep people development at the forefront of its thinking, and establish a pipeline of high-quality successors at various levels. As part of this process, the following should be undertaken:

  • Implementing a skills self-assessment to identify development areas for individuals and for the team as a whole. This typically takes the form of a matrix which plots team members on one axis and required skills on the other.
  • Developing bespoke individual training plans and a team-wide training curriculum for staff. This should ensure all team members possess a core level of knowledge across technical, soft skills, regulatory and business areas. Inviting internal speakers from other parts of the business and external advisors to regular team days and off-sites can be an efficient way of implementing part of the curriculum
  • Ensuring that set team objectives align to individual career goals and the wider company secretarial strategy
  • Encouraging and facilitating networking opportunities for team members
  • Identifying high-performers as potential future leaders as part of firm-wide ‘next generation’ programmes 
  • Organising secondment programs to other parts of the business, such as compliance, risk, HR or internal audit – this could also be externally to regulators.

Move out of the comfort zone: Organisational change may provide opportunities for team members to shine. In financial services, for example, structural reform and the SMR have been key opportunities for the company secretariat to make a mark and work closer with other parts of the firm. Finding time for team members to embrace these opportunities may have a positive impact on how the individual and wider company secretarial team are viewed.

2. Board and committee management

Champion quality: The role that the company secretariat plays in quality control of board packs varies. Strong teams perform a substantive examination of papers, confidently feeding back to presenters and sponsors where quality is not at the level expected. Good teams also proactively provide training and communication to the business to help them write better papers and manage their internal review processes so as to meet board expectations.

Innovate as well as preserve: Board support is an integral part of any company secretarial team. What sets some apart is the extent to which they help boards to innovate across a number of aspects; from the use of technology, to the creative use of external experts in the digital space and finding new ways for the boards to engage with staff. Being known for innovation and a commitment to continual improvement can help reinforce the value of the company secretarial team to stakeholders.

3. Compliance and processes

Safeguard the corporate memory: The loss of corporate knowledge is one of the main issues for the company secretariat experiencing a high turnover of staff. Robust handover procedures will help an incoming company secretary get up to speed quickly. Some supplement this with an induction pack that covers not only team operations and day-to-day running, but also includes: an overview of the firm, its history in relation to corporate transactions, significant changes (including rationale) to the way the board has operated and the firm’s strategy.

Promote robust document management: As owner of a number of important documents, the company secretarial department is often the point of contact for other areas in the business requiring specific company information and documentation. This could include corporate structure, governance manuals, board and committee memberships and directors’ training and induction materials. Adopting appropriate technology to retain such information and ensure ease of access is therefore crucial for efficiency.

Find the right balance: The quality of minute taking is vital, especially in a highly regulated environment like financial services. Regulatory investigations into banking failures during the financial crisis have highlighted, among other matters, the importance of board and committee minutes evidencing sufficient challenge and appropriate detail.

This issue has recently led to the Treasury Select Committee writing to ICSA: The Governance Institute to ask its views on minute-taking standards, with the findings of its consultation due shortly. Many firms will provide training for minute takers (including individuals outside the company secretarial team supporting management committees) to ensure that a consistent high standard is adopted, with quality reviews undertaken.

Scan the horizon: Company secretaries, especially those in financial services, will be conscious of working in an environment with constantly evolving and extensive regulations. Keeping abreast of changes can be a significant challenge for the company secretarial team and consequently they are examining how best to leverage horizon-scanning by risk and compliance departments; investing time to monitor regulatory developments, in particular any associated with governance; and analysing potential impacts.

4. Performance and communication

Confidence in using judgment: Given its role in maintaining relationships with the board, senior executives and third parties, it is important to equip team members with the ability to manage stakeholders, flex their approach and exercise judgment. Training in communication, conflict management and stakeholder management can be beneficial.

Become a business accelerator – not a brake: Company secretaries are expected to navigate a tricky path between optimal protection and efficiency. Directors want assurance of robust governance in light of their individual accountability and may request the introduction of additional checks and processes. This could be at odds with simultaneous directives from the board to reduce cost and increase efficiency. Company secretaries who balance these competing priorities well tend to build in safeguards against inefficiency ranging from regular pruning of the board packs (to strip out ad hoc requests creeping into regular reporting) to periodic reviews of the governance model for streamlining opportunities.

Keep score: Boards and chairmen want to explicitly monitor the performance of the company secretariat, given the fundamental support it provides and the existence of equivalent reporting for other departments such as internal audit, risk, compliance and finance. Many company secretarial teams will report on a series of metrics (such as timeliness of board packs), but leading firms are supplementing this with information on the benefits that they deliver. This includes the results of surveys from the business, progress against departmental strategy and the use of external benchmarking.

Hallmarks of success

The hallmarks of an effective company secretarial team include development of a robust strategy, focus on people development, promotion of a culture of learning, and implementation of more efficient processes. The journey towards this goal starts with being able to measure current performance and track progress against industry benchmarks. It is important that a critical eye is applied to the functioning of the company secretariat, since, without high performance here, fully effective boards and governance will be more challenging to achieve.

Tasneem Saiki is an Assistant Manager, Gurdeep Rai is a Senior Manager and Natasha de Soysa is a Partner in Deloitte’s financial services governance team

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