Frequently Asked Questions
Corporate governance is undergoing much questioning as the consensus grows that there were failings in corporate governance that contributed to the financial crisis. We are creating a global professional organisation – one building on the strengths of national associations to represent the practitioners. Corporate secretaries are on the front line in helping companies implement corporate governance best practice. Governance is as much about people as it is about policies and procedures. Corporate secretaries are part of the solution.
CSIA represents more than 70,000 governance professionals who can now express a global voice in shaping corporate governance best practices based on their experiences, expertise, and insights. To make governance work, input is required from those who put it into action corporate governance standards and programs.
This is particularly important during an economic downturn when most companies tend to focus on short-term performance instead of the long-term sustainability of their businesses.
Broadly speaking, the corporate secretary has four roles: compliance, advice, support, and administration.
Compliance: listing rules, regulations (e.g. Securities and Exchange Commission in the US, Financial Services Authority in the UK, Securities and Futures Commission in HK, China Securities Regulatory Commission), and other legal, environmental, corporate social responsibility, financial, and contractual matters.
Advice: advising the chairman, board, and its committees (e.g., audit, governance, and remuneration, and nomination), corporate governance, stock exchange requirements, a communications channel for non-executive and independent non-executive directors and shareholders, organisation of the annual general meeting, and overall responsibility for the annual report.
Support: legal structures of the company, group/company transactions (e.g., acquisitions – connected and otherwise).
Professional Administration: share option schemes, insurance, pension scheme arrangements
Different companies and different cultures emphasize varying aspects of the corporate secretary’s responsibilities. In some companies, the advisory role may be dominant, while in others, the compliance responsibility may be the most important. Ultimately, as the accounting firm Deloitte notes, “an effective corporate secretary leads to further growth of confidence from potential investors.”
In France, for example, at the financial institution Société Générale, “the mission of the Corporate Secretary unit is to ensure the legal and tax security of the Group's activities. He/she is responsible for the Group's compliance function and oversees and manages the Group's insurance contract. Furthermore, the Corporate Secretary ensures the development of Société Générale Group's sustainable development and innovation approach. The Corporate Secretary unit is formed of the Legal function, the Tax Department, the Insurance Department, the Compliance Department, the Innovation Sustainable Development Department, and the General Inspection.” (Source: http://careers.socgen.com/groupe/en/knowing/our-industries/corporate-secretary.html)
They differ greatly, depending on the country or geographic region. In Asia, they tend to be younger and the likelihood of a corporate secretary being a woman is higher than in the United States, United Kingdom, and Australia. For example, in Hong Kong, 63% of the members and students of HKICS are female compared with 30% of the members in the United Kingdom. However, in the United Kingdom, 50% of the students are female so the balance is slowly being addressed worldwide.
The financial crisis and the weaknesses in corporate governance that the crisis exposed were major reasons behind the formation of CSIA. Our profession is on the front line. We are part of the solution. We believe that governance best practices must be at the core of all sound, ethical business decisions. We’re the governance professionals. Our counsel can help boards determine the strengths and weaknesses of their corporate governance arrangements, and to implement reforms. Through CSIA, corporate secretaries and governance professionals will have a global voice in promoting corporate governance best practice.
Several studies, including those by the OECD and Professor Shaun Turnbull, conclude that one trigger for the global financial meltdown was a failure in corporate governance.
Before and during the financial crisis, corporate secretaries were providing advice to their boards and senior management. They were and are leading efforts to review a companies’ corporate governance practices and adherence to the principles that support best practice governance.
The UK combined code stipulates that every director must have access to the advice and services of the company secretary – advice we would encourage all companies everywhere to adhere to.
That said, we shouldn’t assume that there has been a massive failure of governance across the entire corporate community. That isn’t so. While there have in the last decade been isolated cases of non- bank and financial institutions getting into serious difficulty (in some cases through fraud, as opposed to incompetence), by and large the corporate failings in 2008 and 2009 occurred primarily in the banking and financial services sector – and the reasons are now fairly clear: boards failing to understand the risks their companies were taking or the complex financial products in which they were investing; inappropriate remuneration structures which encouraged a climate of greed and recklessness; and, failure of regulatory oversight. No doubt there were other reasons, too. The mechanisms supporting good governance, including corporate secretaries, by and large worked, and we shouldn’t imply that failure in the banking sector is a disease affecting the whole corporate community. If there is one area in which most companies could be found wanting, it was, perhaps, that they did not anticipate the liquidity crisis that unfolded in light of the banking failures, which thus impaired their access to capital.
It should be remembered that corporate governance is a journey, not a destination. Our profession has a dedicated role in enhancing corporate governance.
Governance is the principles and structures that are put in place to support companies in their drive to create sustained value. It’s more than a series of codes and other documents. It’s a company’s culture and the conviction of its stakeholders in ethical practices. It’s a system by which a company is directed and managed; how the company’s objectives are established and achieved; how risk is monitored and assessed; and, how performance is optimised in sustainable ways, ones that take into consideration stakeholders’ interests.
At the core of governance are people. Professionally trained people who put integrity and ethics not short-term gain at the centre of business. One of the core elements of integrity is independence. A good corporate secretary should be the “wise counsel” of the chairman and non-executive directors, and a source of advice and support to the whole board in discharging the company’s objective of producing sustainable performance in the interests of shareholders and the wider stakeholder community.
CSIA represents corporate governance practitioners, those at the front line of governance, the gatekeepers of governance, so to speak. We bring a different and unique perspective to the table. Corporate secretaries have a broad brief and access to a tremendous amount of information about the company and corporate governance best practice. This gives them a unique vantage point when assessing risk or advising the chairman/board on matters of governance and compliance. The CFO tends to focus on finance while legal counsel tends to focus on legal matters. The corporate secretary takes into account their views plus the opinions/likely reaction of shareholders, other stakeholders, NEDS, INEDS, listing and securities regulations, structural impact of corporate decisions, and many other factors that directors and other management simply don’t have information about. That makes corporate secretaries unique: their multifaceted vantage point, expertise, and experience.
We’re part of the answer in helping the global economy recover from the financial crisis. As a profession, we see the need for our greater involvement in ensuring the adoption of corporate governance best practice is adopted worldwide. That is why we are joining together as a worldwide organization, pooling both our expertise and experience, and providing that to the global standards setters for corporate governance. Our objective is to ensure that these organizations, such as the OECD, have the best information and insights available to inform their recommendations.
The research report released at the official launch of CSIA - 20 Practical Steps to Better Governance – is one example of how we are doing that. Another: CSIA will work with the Global Corporate Governance Forum to produce a Corporate Secretaries Toolkit, which will help establish the role and profession of corporate/company/board secretaries in targeted countries.
We will also lobby key governments who are engaged in the World Trade Organization trade talks and work with the WTO to introduce a separate Head in the Services Sectorial Classification list for governance, that of compliance, secretarial, and advisory professionals (GCSAP). This sector isn’t officially recognised by governments. As a consequence, bi-lateral and multi-lateral trade agreements (e.g.,NAFTA, CEPA, etc.) don’t include this sector. This may stifle trade which, in turn, slows the global economic recovery. Inclusion of GCSAP in CEPA would support efforts to broaden corporate governance best practice worldwide.
We understand that different cultures and countries have their own laws, regulations, and codes of best practice on corporate governance. That said, there are general principles behind good corporate governance practices; those espoused by the OECD are good example. CSIA’s approach will be from the practitioner’s perspective, which we hope will provide a practical element to governance that sometimes companies fail to grasp the importance of when faced with general governance principles issued by regulators and government-related bodies.
Education is key. The under-representation of women in the boardroom and at senior management level globally should be addressed through education and recruitment programs. We should not ignore half the world’s population; doing so cuts your pool of potential recruits by 50%. More board appointments for women should be encouraged.
There is a common thread than binds us all: the desire for better corporate governance. There are the OECD principles, which are widely accepted. The drive for better corporate governance is what is driving the formation of CSIA, the reason why governance professionals worldwide have come together.