As the breadth of responsibilities assumed by boards of directors increased over the years, so has the corporate secretary’s role increased in scope and visibility.
Today’s corporate secretaries serve as key strategic advisers to their boards and executive teams to assure proper corporate governance.
The Modern Corporate Secretary’s Roles – Corporate Governance
Typical corporate secretary responsibilities include the nominal legal requirements, as noted by the Society for Corporate Governance — maintaining the minutes of boards and board committee meetings, ensuring dividend payments and maintaining company records — in addition to a broad range of activities that have evolved over the years.
According to Paul Marcela of Governance Partners Group, LLC, corporate secretary responsibilities can be broken down into six categories, many of which are related to setting and maintaining corporate governance — the set of practices according to which the company operates:
- Structure, design, implementation and maintenance of the company’s corporate governance: ensuring that the board and its committees operate according to the company’s articles of incorporation and other foundational documents
- Development and enhancement of corporate governance programs and processes: implementing best corporate governance practices, and conducting audit, evaluation and education programs for board members and executives
- Board and board committee support: management of shareholder, board and board committee meetings, serving as liaison among company stakeholders
- Engagement and management of third-party corporate governance service providers, such as agenda management and board portal providers
- Collaboration with the executive management team to plan and set objectives for board activities, producing financial reports and press releases and managing corporate governance activities
- Legal entity governance management: assuring and verifying that subsidiaries, joint ventures and non-U.S. entities meet corporate governance standards.
Assuring Data and Communications Security
Much of the corporate secretary’s role entails communicating with multiple entities in the company and serving as keeper and overseer of all company documents and files, including:
- Meeting minutes
- Financial documents
- Legal documents
- Personnel documents
- Internal communication
- And others, many of which are confidential and/or sensitive
As data security has become a major concern in recent years, good governance requires using a secure and efficient means of file storage and sharing to minimise the risk of exposing board and other sensitive data. The Sarbanes-Oxley Act of 2002, for example, aims to enhance corporate governance by promoting board independence and imposing new responsibilities on the board audit committee. Many companies started appointing outside, independent directors to their boards (NYSE and NASDAQ even require a majority of independent directors in both exchanges’ listed companies, as described in this University of Georgia Terry College of Business 2007 study.) This made board communications more complex and less secure, as independent directors work from outside the companies’ main offices and may not adhere to company information security best practices.
One of the best practices to assure ease of use and data security is using a board portal for all executive and board files. Board members can easily share notes during material review via a portal and communicate over secure channels. Security, file retention, file distribution and reporting are tightly controlled by the company’s IT department.
Minimising Liability Risks
The corporate secretary is also responsible for facilitating good corporate board governance practices as a bulwark against personal liability claims, according to the report, “Piercing the Corporate Veil.”
Plaintiffs suing a corporation might seek to hold shareholders responsible for the corporation’s liabilities. To fend off this type of action, the corporate secretary needs to demonstrate, through proper board meeting minutes and other documentation, that the board took the appropriate actions to maintain separate the legal existence between the corporation and shareholders.
Another risk that the corporate secretary needs to take into account is claims by the company’s shareholders that the board has breached its fiduciary duty of care and loyalty, or failed to follow the business judgement rule that presumes that “the directors of a company have acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the corporation,” according to “A Look at the Modern Business Judgement Rule.” To minimise this type of risk, the corporate secretary must provide evidence of proper board decision-making through orderly minutes or board and board committee meetings. He or she must also show that board members got information from internal and external sources and were well informed, and had conducted reasonable due diligence in gathering and considering material information.
Maintaining Readiness for Change of Ownership
Private companies may go public or undergo change of ownership. The corporate secretary must maintain the company’s readiness for sale, merger or going public. This includes prepping and maintaining documentation demonstrating the company’s corporate governance and transaction authorisation, as well as adequate financial documents. In the case of a company going public, the corporate secretary is responsible for U.S. Securities and Exchange Commission requirement compliance. The corporate secretary also prepares documentation required by lenders, auditors and government authorities.