For most outside of the governance arena, the corporate secretary is viewed simply as the designated minute taker for the corporate board. This could not be further from the truth. Corporate secretaries should be trusted advisors who provide the organization with guidance and ensure the company is in compliance with regulatory issues.
While serving as a governance professional in support of the board of directors and corporation itself, the corporate secretary must maintain traditional responsibilities for entity management, corporate records administration and compliance; however, their role today is much greater.
Today’s business climate’s focus on risk and the current culture of compliance have further impacted the role of the corporate secretary.
With the increased focus on corporate governance practices in light of the financial crisis and the legislative and regulatory response by the Securities and Exchange Commission (SEC) and Dodd-Frank, boards are under pressure to adapt quickly. Failure to adapt and take appropriate steps to create sound governance practices will have a direct negative impact on the entity, its profits, risk management and oversight as well as its perception in its industry.
More than ever, boards are juggling multiple responsibilities, including oversight of the CEO and the organization; succession planning for the board and management; advancing the strategic mission of the organization; and duties to stakeholders, including shareholders for corporations, members or those served by the mission of a tax-exempt entity, or policyholders of mutual insurance companies.
With so much on their plates, how can directors adequately focus on corporate governance best practices? As we have discussed in posts over the past several years director training and education is part of the answer. The other part is as access, whether on the board or through paid advisors, to the requisite expertise needed by the organization to meet its strategic plans. This is where the corporate secretary’s role has evolved. The corporate secretary can play a critical role in the oversight of the board practices, planning of education programs and managing the access to experts.
Beyond taking minutes and other oversight of board practices to ensure appropriate records meet legal compliance, directors should look to the corporate secretary to provide expert counsel on governance issues before taking action, both in and out of the boardroom.
Sarbanes-Oxley and the intense focus on corporate governance have served to give the position a central role in the organization's compliance obligations. Today, there is a recognition that the organization must be able to track and justify every action that occurs as any action could lead to a potential litigation. In order to do so, there must be a process which functions with accuracy and is based on solid governance principles. One thing a corporate secretary cannot do is lock the courthouse doors. That being said, the corporate secretary can ensure that the decision making process followed by the board is appropriate.
In most instances, it is the decision making process of the board that will be evaluated as opposed to the actual decision of the board. Since discovery and trial on the merits of any matter will not occur for several years after the act occurred, the process taken plays a key role. Think “objects in the rear-view mirror may appear closer than they are.” Everything looks different looking back. This is also true with regard to board decisions. Three to five years after a matter finally makes it to trial, it may look different than anyone remembers, but the process will not look different and the corporate secretary can provide a valuable service by overseeing this process.
As with all governance practices, what may be a best practice for one organization may not be a best practice for your organization. As such, the role of the corporation for one entity will be different than a separate company. It is critical that all organizations carefully define (and communicate) the expected role and responsibilities of the corporate secretary to provide appropriate support and training, and to make certain that the right individual occupies that position within the organization. Similarly, this will aid the board in understanding how to properly utilize the corporate secretary.
The corporate secretary is and will continue to play an increased role going forward. Organizations need to embrace this role and start filling the corporate secretary position with those individuals with the appropriate expertise, or access to outside professionals with the appropriate expertise. Directors need to take full advantage of what the corporate secretary can offer.