With ever-increasing importance of Corporate Governance practice in light of global financial crisis, Board of Directors is under tremendous pressure to quickly redesign their business structure and framework and adopt the new business landscape. The Companies having a weak business corporate governance framework are more prone to low profits, high risk and dissatisfaction among investors and stakeholders.
The Board of Directors have to ensure that the core concepts of corporate governance i.e transparency, independence, accountability, responsibility, fairness and social responsibility and awareness are fulfilled and properly complied with. They have so much to do, so how can they effectively focus on corporate governance practices? It is very important to build transparent, sustainable and value based business framework.
Here, the most important senior and strategic –level corporate officer in the Boardroom i.e “Company Secretary” or most appropriate term “Corporate Secretary” may be in full time employment or practice comes into light, having an important and crucial role to oversee responsible Board Practices. The Company Secretaries may be termed as “Corporate Governance Officer” taking into account the role and responsibilities of company secretaries in New Companies Bill, 2012 and The Institute of Company Secretaries of India (ICSI) should give permission to its members to use such designation in future.
In the post global financial crisis, the role of Company Secretary seems more complex. He is expected to be fully equipped with knowledge in various areas to offer support to Board of Directors to enable them to make sound and ethical business decisions. If Company Secretary fails to provide right advise to Board of Directors at right time and in right amount, it can result in costly mistakes. The few indefinable rewards for good governance in the company are:
1. It enhances Board and Management confidence in their decisions,
2. It reduces conflict of Interest between management and stakeholders,
3. It reduces Risk i.e Operational and Reputational’
4. It ensures proper due diligence on continuous basis, the need of last minutes blunders where such actions can result in an associated loss of focus on real business issues and more productive activities.
Spread Your Wings
To Start with an excellent quote of Gay lea’s Micheal Barrett, a Corporate Governance Professional:-
“The role of corporate secretary to evolve… Gone are the days of the horn-rimmed, pencil sharpened, visor clad, minute taker, the corporate secretary is now:-
1. An active partner with the directors to ensure board effectiveness and good governance
2. An Advisor to the Board to ensure that policy and intent are manifest correctly
3. A Resource to provide trends and information
4. The Ombudsman of all member of company to ensure a commitment to the values that we hold dear.
To work and practice in the areas of implementation of Corporate Governance is highly specialized Job but it will guarantee huge value addition to profession of Company Secretaries and to the Organizations and Society as well.
There are 4 major areas of Practice in arena of Corporate Governance for Company Secretaries whether in full time employment or in practice:
1. Governance Fundamentals:
a. Corporate Governance Program Assessment
To Audit current governance practices and provide recommendations to improve existing programs.
b. Governance Requirements
To ensure and report that fundamental governance components are in place to meet law and Stock Exchange requirements, and for private companies, ensure sound governance practices.
c. Governance Documents & Implementation
To establish and draft appropriate Committee Charters, Corporate Governance Guidelines and By-Laws, document details of Board expectations of management – CEO, Documentation of COO and CFO expectations, monitored, and reported to ensure measurement of performance can be done on an ongoing and timely basis
d. Creation of Director Independence Standards
To establish written standards to meet director independence requirements.
e. Committee Membership
To evaluate committee membership to ensure standards are met and provide committee support.
f. Communication with Governance Stakeholders
To Develop and implement appropriate strategy for communicating governance practices with key stakeholders.
g. Management Support
Provide cost-effective legal support to meet corporate governance and other regulatory requirements.
2. Board Support:
a. Board Evaluations
To conduct confidential Board Evaluations to the needs of the Board including Chief Executive Officer of the Company and to conduct timely evaluation of troubled and straggled Boards and report on it.
b. Director Orientation Programs
To Design effective orientation program for new directors.
c. Board Education Programs
To Identify topics of interest and ways to expose Board members to relevant learning opportunities.
d. Board Succession Planning
Assist Board and Governance Committee to determine whether the Board has the right mix of skills and experience and to identify future needs including CEO Succession Planning.
e. Committee Chair and Lead Director Support
To support Committee Chairs and Lead Directors to ensure charters, corporate governance guidelines and other governance requirements are met and to develop agendas and meeting schedules to ensure efficient and effective meetings.
f. Board Compensation Management
To establish processes to track and record director and CEO‘s compensation and to stay abreast of director compensation and stock ownership trends and guide for restructuring it.
3. Strategic Planning:
a. Development of workable policies and standards such as:
- Equity policies
- Related Party Policies
- Insider Trading Policies
- Directors Independence Standards including Conflict of Interests
- Corporate approval policy to ensure that appropriate matters are brought before the Board.
- Investors/Stakeholders communication strategies to enhance the governance reputation.
b. Guidance to the Board as a whole to review the working of Senior Management including CEO, COO and CFO.
c. To Develop Risk Management process i.e developing the plan for ensuring ongoing oversight in identifying the corporate risk and mitigating it i.e both reputational and operational.
d. To guide Board of Directors on documentation of Internal Controls and management information systems and implementing system for timely updation and control by Board of Directors on it and to assist in monitoring the reporting chain that allows CEO/CFO to sign their certifications.
e. Dealing with Shareholders Activism i.e Institutional Investors, Hedge funds, shareholders representative and framing procedures to deal with them.
f. To guide on performance pay for external counsels and Advisors.
a. He is link between Board and Management. Hence, he has important role to play as whistle blower, when there is fraud within the organizations by framing proper whistle blower policy of the company and report to the oversight Board.
b. He should guide oversight board on policy adopted so that Auditors remains independent
Company Secretary has to wear many hats. He is an active partner with board for corporate accountability and corporate citizenship, Advisor, Resourcer, ombudsman for all members of the company.
As per David W. Smith, former president of the Society of Corporate Secretaries and Governance professionals, describe corporate secretaries “As Gate Keepers and filters of Governance and other challenges facing corporations.”
As Board come under increasing pressure to be accountable for how well they do their job in the environment of increasing scams, monitoring the role, duties and liability of the directors has become an essential piece in the governance puzzle. With the increased complexity of today’s corporate activity, the role of company secretaries in practice or in employment have become crucial and grown exponentially. They are now seen as Chief Governance Specialist. We, as Company Secretaries can emerge as Umpires, referees and even Judges between the legislative style pressures of the shareholders in Annual General Meeting mode and the executive directors in executive mode.
Dr. John Carver, one of the most published thinker on Governance worldwide says that “it seems to me that corporate secretaries have more opportunity to influence corporate governance in a modernizing directions than academics and lone voices.”
With these concluding remarks, I suggest to fully utilize expertise available to us and spread our wings in the arena of Corporate Governance. As Corporate Governance has become high profile issue now a days and regulatory requirement are becoming more complicated and stringent day by day, the demand of company secretaries working and practicing in this specialized area will be tremendous. By Specializing in the arena of Corporate Governance, we as professionals can really lend a qualified hand to corporates to shape their destiny favourably in ethical manner , which will further promote in developing most sustainable society.
By: CS Shilpi Thapar
Tags :Corporate Law