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Company secretaries emerging as governance custodians

Wednesday, 31 October 2018   (2 Comments)
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By Parmi Natesan and Prieur du Plessis

The King IV Report on Corporate Governance for South Africa highlights the importance of the role of the company secretary as the custodian of governance. Here’s what some leading company secretaries have to say about what this means for their roles.

One of the main developments of King IV was the movement away from stipulating specific practices to be followed towards an emphasis on the outcomes to be achieved. In line with its focus on outcomes, the role of the company secretary falls under Principle 10 of King IV: The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities. The role of the CEO, Delegation and Professional Corporate Governance Services are dealt with under this Principle.

Even if not obliged by law to appoint a company secretary, King IV recommends all organisations consider appointing a professional to provide these corporate governance services, as appropriate to the organisation’s circumstances.

This approach provides flexibility as regards to how the company secretary’s role is formally structured, but makes it very clear what that role should achieve. As with much of King IV, it represents something of a departure from traditional approaches and means that company secretaries constantly have to question whether what they are doing will result in the desired outcome.

We asked some leading company secretaries to answer three questions to gain an understanding of how they are responding to their redefined role.

What value do you feel a good company secretary adds to the board?

Distell’s Lizelle Malan and Sanlam’s Sana-Ullah Bray both highlighted the move from providing a support function to acting as the custodian of governance. Carina Wessels, Group Company Secretary at Alexander Forbes, emphasised the need for a commercially minded person who would add value by providing guidance that enables business strategy, and not governance for governance’s sake. Given the pace of change, she argued that company secretaries must be proactive.

Vincent Barnard, Group Company Secretary of the Professional Provident Society (PPS), emphasized the company secretary’s role in facilitating interaction between management and the board, while maintaining his or her independence. To do this successfully requires not only the immaculate discharge of administrative duties, but “adhering fastidiously to ethics and the values of the organisation”.

Annamarie van der Merwe, an IoDSA facilitator, stressed the need to look beyond strict compliance and consider good governance within the context of advancing the company’s best interests.

What is the biggest challenge facing company secretaries? And what advice do you have for handling it?

Danielle Heynes, Remgro’s Company Secretary, is forthright: “Mindful of all the governance failures we are seeing in corporate South Africa, one of the biggest challenges faced by company secretaries must be to stay independent of the board and objective in performing their functions, without fear or favour.”

Van der Merwe warns that many directors misunderstand the company secretary’s role, and thus risk failing to obtain the best possible guidance. To overcome this, company secretaries must earn directors’ trust by the way they discharge their duties. “For this purpose, a company secretary needs a high level of emotional intelligence, and excellent communication and interpersonal skills,” she says.

Wessels pinpoints negotiating the lines of accountability between management and the board to be the greatest challenge she has faced. Her advice? Remember that your ultimate loyalty is to the company, so every decision you take must be guided by whether it benefits the company or not.

PPS’s Barnard also highlighted director behaviour and non-performance as a prime challenge, counselling a close collaboration with the chair to achieve resolution as swiftly as possible.

For Bray, a key challenge is the ongoing spate of regulatory and legislative changes, all impacting governance strategies and practices. As the governance custodian, the company secretary needs to ensure the right people within the organisation are kept abreast of the changes and the implications thereof. 

Malan has good general advice for dealing with challenges, whatever they might be: Get support from both the chair and CEO and be guided by the professional code of conduct. It’s important to avoid the temptation of making popular decisions, but without gaining the reputation for being inflexible. “I emphasise that listening is key – that’s how you become a trusted business partner,” she says.

In conclusion: Recent scandals in both the public and private sectors have again highlighted the positive role governance has to play in supporting corporate sustainability. As custodians of governance, company secretaries have to ensure the direct link between governance and success becomes a reality for the organisations they support. 

 
 Parmi Natesan    Dr Prieur du Plessis 

Parmi Natesan and Dr Prieur du Plessis are Executive Director: Centre for Corporate Governance and Chairman of the Institute of Directors (IoDSA) respectively. 

Enquiries: 
info@iodsa.co.za
Better Directors. Better Boards. Better Business

Comments...

Shadrack M. Ramosa says...
Posted Wednesday, 07 November 2018
Company Secretary, in my observation, has evolved over time in response to the ever turbulent changing environment we find ourselves in. In the early years, it was dominated by immaculate administration, then followed by being custodians of compliance and lately by being more custodians of corporate governance. This development is a welcoming one, given the utter importance of king IV emphasising the desirable outcome based approach instead of adhering to fixed practices towards achieving the desired outcomes. Of course, the circumstances of each company or organisation should determine the best way possible to employ the services of this strategic position of a company secretary. Finally, for affording the advancement of company secretary as custodians of good corporate governance would add more value on increasing the layers of ethical leadership and effectiveness to organisations facing the well known and recorded governance failures in Corporate South Africa and elsewhere. S Ramosa
Patrice Lasserre says...
Posted Tuesday, 06 November 2018
In my opinion, Company Secretaries are the custodians of compliance. I am not sure about them being custodians of governance as they are normally not involved, inter alia, in risk, strategy and overseeing of executive, three integral parts of governance. Patrice Lasserre.