company secretarial tips

8/10/2019 Company Secretarial Tips

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Company Secretarial TipsCorporate Citizenship!t is being widely accepted globally that corporate citi+enship is vital to longterm pro0tability and sustainability of an organisation. Corporate citi+enship

refers to company's commitment to ethical behaviour in its business strategyand operations, including a strong concern for social and environmentalissues and sta*eholders' interests. An organisation which demonstrates goodcorporate citi+enship bene0ts from improved reputation, greater productivityand higher employee retention. !t is therefore important that boards integratecorporate citi+enship into their corporate strategy.

The board may improve corporate citi+enship through the following"2. -e0ning a set of values that the organisation should adhere to in terms

of business integrity, transparency, employee welfare, environmentprotection and corporate social responsibility. 3hen de0ning the values,guidance may be sought from the 45nited 6ations #lobal Compact', which is

a global corporate citi+enship and sustainability initiative. !t aims to assistcompanies in implementing a set of universally accepted principles on humanrights, labour environment and governance issues so that businesses not onlybene0t the economy but also the society and environment.

7. ormalising the implementation of corporate citi+enship by allocatingthis tas* to a subcommittee of the board, which may be the corporategovernance committee. The responsibility of this subcommittee will be toensure that the de0ned set of values are eectively being adhered to by theorganisation, and to ma*e recommendations to the board on how to improvethe implementation of the corporate citi+enship.

8. Encouraging ongoing and constructive dialogue with all sta*eholders,

including employees, regulatory authorities, nongovernmental organisations,local communities etc., so as to understand how to better improve longtermsta*eholders' interests and to proactively prevent any adverse impact of theorganisation's activity on sta*eholders.Corporate citi+enship involves investing resources now for bene0ts whichmay ta*e time to materialise. 9owever, the longterm bene0ts, in terms ofincreased shareholder and sta*eholder value, are undeniable. To sustainthese bene0ts, the board should ensure that implementation of corporateciti+enship values remains an ongoing process in the organisation.


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Company Secretarial TipsDirectors: Joining the right board9aving the right board composition is one of the factors which contribute toimproved board performance, and therefore selecting the right director for

the board of a company is crucial. rom the director's perspective, it iseually important to analyse the board on which the director is going to sitand assess whether he/she will be able to ma*e valuable contributions to theboard. This can be done through a due diligence on the company and theboard by the director prior to his appointment, and by ensuring that thedirector's induction program provides the right information and guidance.Due diligence prior to appointment-ue diligence on the company and board involves a thorough examination ofall relevant aspects, which may include the following"

Consulting the company's annual report and website to understand thebusiness model, governance framewor*, mar*et environment and dynamics,

recent operational and 0nancial performance, the strategy and ris*s of thecompany.

9aving a preappointment meeting with the company secretary tounderstand the board composition, board dynamics and board procedures.

Assess the following"o 3hether the company and the board are clear on the

expectations of a new director and whether the director will be able to ma*ea positive contribution to the board.

o 3hether the new director will be able to ful0ll his/her timecommitment in terms of preparation for and attending board and committeemeetings.

o !f the performance of the company is dwindling, whether the newdirector will be able to improve the company's performance.

o 3hether there is a suitable director induction program andadeuate ongoing training/development.Directors inductionAn eective director's induction program should include information/guidanceon the following"

2. The duties and responsibilities of the new director.7. :oard and committees structure, board composition, matters reserved

for the board, delegated authorities, terms of reference of board committees,brief biography of other directors, succession planning, and any policies onreelection of directors.

8. -etails of board meetings, including minutes of meeting, schedule ofdates of future meetings, board procedures, and any training reuired for theuse of online board portals and software.

;. :oardroom behavior, including an explanation of the expectations,culture, values, codes of conduct/ethics applicable to directors.


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?. 6ature of the company, business and mar*ets. This includes thecorporate history with details of *ey events, the organisational chart, detailson the domestic and foreign branches, products and services, *eyperformance indicators, ris* pro0le and tolerance, internal controlprocedures, other relevant details.

@. Company's people, especially senior management and importantcontact persons.. Company's relationships with investors, ma&or shareholders, *ey

customers, suppliers and sta*eholders.

The main point of contact for a prospective director is usually the companysecretary, who has an imperative role to play in assisting the director incarrying out the due diligence on the board and company, and eventually, forthe induction of that director if he agrees to his appointment.


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Company Secretarial TipsBoardroom Technology3ith the advent of tablets and online board portals, boards around the worldare increasingly ma*ing use of such boardroom technologies. !ndeed, as

businesses and corporate communication become more digital, it hasbecome imperative for boards to start adopting technology in the boardroom.1ome of the bene0ts of using boardroom technologies are listed below.Bi Easier and more rapid manipulation of board papersD 3ith online board

portals, which provide a secure environment wherein board papers can beuploaded, the company secretary can easily manage board papers,digitally distribute them to board members, segregate informationaccording to the rights and restrictions of dierent committees, andamend the board papers online with updated information in no time. Thisavoids the hassle and stress of printing board pac*s, arranging for theirdelivery, last minute changes to board papers and shredding of board

pac*s after meetings. -irectors can also ta*e advantage of the variousoptions available in most board portals, li*e annotation or commenting onboard papers.

Bii Increased visibility into the operations of the companyD Online boardportals allow directors to have access to board papers and informationeven after the meeting. This means that 0gures and information canconstantly be updated on the portal and directors can thereby have a realtime update on the progress of outstanding actions following the meeting.

Biii

Greater responsiveness to unexpected eventsD 1ome unexpected events,li*e disasters and crises, may warrant an urgent board meeting. Throughtablets, online board portals and teleconferencing, urgent board meetings

can be held more easily, as compared to arranging for paper board pac*s.Biv

Improved board dynamicsD The fact that all information are available andupdated on a board portal means that directors have all the informationthat they reuire on a single platform and can therefore ma*e informeddecisions more easily and rapidly. )oreover, through online board portals,directors who are seated in dierent geographical locations can haveaccess to the board papers at the same time as all other directors, andcan thereby provide better input to the board meeting.

:oardroom technologies are de0nitely not the panacea of the board, but theycan be used as an enabler to improve board performance. To get the best out

of boardroom technologies, the board needs to include the use of technologyas a regular item on the agenda, to consider and reassess the bene0ts andris*s of technology to the board and the company.


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Managing dissent in the boardroom

Company Secretarial Tips

It is commonplace for some directors to disagree or dissent with other directors of the board as

this is an integral part of the decision-making process. Dissent may occur due to differing views

among directors on issues such as development and implementation of a new strategy,

acquisition of a new business, the dividend policy, or the appointment and retention of directors.

If not managed, boardroom dissent may lead to the following:

Though boardroom dissent helps the board to have healthy and robust debates, when it

degenerates into conflicts and personal attacks, the effectiveness of the board, especially its

decision-making process, is eopardised! and

Dissenting directors, feeling that the board is not receptive to their views may out of

e"asperation resign from the board. #or listed companies, if the resignation needs to be notified to

the public and if the dissenting director discloses the reasons of his resignation in the press, this

may tarnish the reputation of the company.

It is therefore important to manage dissent in the boardroom so as to safeguard the effectiveness

and efficiency of the board.

The following can help to manage dissent in the boardroom:

$ffective board leadership % The chairperson has a duty to oversee the board and encourage

open and constructive debate. The chairperson should therefore be able to call board members to

order when the discussion becomes too aggressive or counterproductive to efficient decision-

making! Implementing and communicating a proper boardroom practice guideline to all directors,

which would include guidance on the e"pectations in terms of professionalism and behavior in the

boardroom, and other aspects of boardroom etiquette. This guideline will be particularly helpful to

directors having a dominant personality and will help to improve the board culture, especially in

terms of intra-board interactions and the decision-making process! and

&dequate preparation by directors prior to board meetings % Directors should raise

disagreements on an informed basis, after analysing all relevant facts and figures or seeking

appropriate professional advice. This will also lead to more mature and obective debates in the

boardroom, rather than dissent being based on personal disagreements among directors.


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Though managing dissent is the individual responsibility of all board members, the chairperson

should constantly supervise the board and its decision-making process to ensure that dissent in

the boardroom is properly managed.


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Company Secretarial TipsAvoiding directors con!icts o" interests-irectors have the 0duciary duties to act in the best interests of the companyand to avoid any conict of interests. ailure to avoid conict of interests may

lead to penalties and sanctions from regulatory authorities, includingdisuali0cation of a director. Therefore, it is important for directors, with thehelp of the company secretary, to ensure that conicts of interest areavoided.A# $hat amounts to con!ict o" interest%Conicts of interests may be broadly classi0ed into the following categories"Bi -irect 0nancial interest D whereby the director directly derives 0nancial

bene0t from a transaction of a company, or whereby the director has aninterest Bis director, shareholder, oFcer, trustee, etc. in another entityfrom whose transaction he shall or may derive a 0nancial bene0t. orexample a sale of assets below mar*et value to a director or awarding a

contract to a company on which the director has an interest.Bii!ndirect 0nancial interest D whereby the director is the parent, child or

spouse of another person that shall or may derive a material 0nancialbene0t from a transaction of the company. or example, awarding acontract to a company on which a parent, child or spouse of the directorhas an interest.

Biii

6on0nancial or personal interests D whereby directors receive no 0nancialbene0ts, but gain some personal advantages, for example awarding acontract to a close friend or close contact of the director.

Conicts of interest include actual and potential interests as well. Therefore,even if a transaction has not yet been conducted, directors need to be alertfor any potential conict which may arise in the eventuality of a transactionwith a person or entity with which they have any direct, indirect or personalinterests.B# &o' can con!icts o" interests be avoided%

The following may help to avoid directors' conict of interest"Bi %egular reminder by the company secretary to directors that they need to

disclose their interests during board meetings, and upon the acuisition ofany interest. The company secretary can also guide directors by providingthem with concrete examples of cases whereby an actual or potential

conict may arise.

Bii )aintaining and updating a register of directors' interests. This is usuallystatutorily reuired in several &urisdictions which also provide for registerof directors' interests to include suFcient details of the interests. Thesedetails might include the nature of the interest, the date from which theinterest arose, and the date on which the interest was noti0ed to thecompany. As best practice, some directors also provide a list of all theirdirectorships in other companies with which a potential conict mightarise if ever a transaction is contemplated with these companies.

Biii To be aware of any conicting situation, the company secretary 0rst needsto be aware of any relationship the directors may have with suppliers,


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customers, competitors, advisors, shareholders, 0nancial institutions andregulators of the company. The company secretary would thereby be ableto foresee any potential conict which may arise and record that interestaccordingly in the register of directors' interests.

Biv A director who has an interest in a transaction should, during the boardmeeting, declare his interest, if not already done, and abstain from votingon that transaction.

Bv All of the above measures can be appropriately set out in a robust conict

of interest manual, to which all directors and the company secretarywould need to abide.


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Company Secretarial TipsThe Business Case "or Corporate (overnanceCorporate governance broadly refers to the ways in which a company isdirected and controlled. There is often a misconception about corporate

governance being a hurdle to the operations of a company, and does notbring any immediate or tangible bene0t. 9owever, companies around theworld are today starting to ac*nowledge that good corporate governancedoes yield considerable bene0ts to the business.1ome bene0ts of implementing good corporate governance are as follows"Bi Substantial improvement in organisational eciencyD corporate

governance entails putting in place formalised processes and internalcontrols, which in turn help to improve board eFciency and eectiveness,enterprise ris* management, 0nancial management practices,transparency in reporting and relationships with shareholders.!mprovement in all the aforementioned aspects of corporate governance

leads to improvement in a company's organisational eFciency.Bii Reduced risk of corporate crises and scandalsD corporate governance

reuires that a company puts in place a robust enterprise ris*management system, which enables companies to mitigate the eects ofeconomic crises and to avoid corporate scandals. A robust enterprise ris*management system, along with an eective succession planning, alsohelps a company to remain operationally viable and prosperous for alonger period of time.

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ositive impact on company performance and pro!tabilityD improvedorganisational eFciency entails more eFcient management, better

resource allocation and higher productivity. This in turn helps to improvecompany performance and pro0tability.

Biv

Improved company reputationD the implementation of good corporategovernance and the eective reporting thereof can help a companyimprove its image visGvis its sta*eholders Bincluding investors, businesspartners, creditors, local authorities and the community. #ood corporategovernance also leads to an improvement in the internal reputation of thecompany by enhancing employees' morale and culture, as the latterbecome more con0dent in the company's future.

Bv Increased ability to access !nanceD a company with good corporategovernance instils greater mar*et con0dence and is therefore better able

to attract 0nance from investors and 0nancial institutions. 1ome stoc*exchanges around the world have also developed indices which depend onthe uality of the corporate governance framewor* put in place by acompany. Therefore, companies with an eective corporate governanceframewor* are viewed by investors as having a greater 4mar*et premium'and they are more willing to invest in such companies.

!mplementing a good corporate governance framewor* involves additionalcosts and resources. 9owever, even if the positive impacts of corporategovernance may not manifest in the short term, in the longer run, a goodcorporate governance framewor* inevitably translates into higher

pro0tability, better sustainability and increased shareholder value for thecompany.


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Risk Communication olicy

The ris* communication policy should describe the internal ris*communication and ris* escalation procedure, by de0ning the reportingstructures among the board, management and employees and the relevant

ris* documentation reuired. !t should also address any external reporting ofris*s, for instance, reporting to regulators or any whistleblowing procedure tobe put in place.!n most cases, the ris* management framewor* would be the responsibility ofthe ris* committee and therefore the terms of reference should cater for theabove. An eective ris* management framewor* enables better reporting bythe company in terms of ris*, which in turn, provide sta*eholders with thenecessary assurance of the longterm success of the company.


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Company Secretarial TipsThe Corporate (overnance ,ole o" Company Secretaries3ith some important responsibilities such as organising board meetings andensuring compliance with laws and regulations, the company secretary plays

a central role in every organisation. Apart from their traditional duties,company secretaries are now increasingly being called to ful0l corporategovernance roles in the wa*e of more stringent reuirements onorganisations for greater corporate reporting, openness and transparency.

The corporate governance roles of the company secretary include thefollowing"Board composition and proceduresBi Ensuring that the board and its committees have the appropriate balance

of s*ills, experience, independence and *nowledge of the company$Bii Establishing a formal schedule of matters reserved for decision by the

:oard and a formal division of responsibilities between the chairman and

CEO$Biii

Assisting the chairman in ensuring that there is open and constructivedebate during board discussions and that professional advice is sought toassist the board to ma*e decisions for complex, contentious or businesscritical issues$

Board information, development and relationshipsBivacilitating eFcient information ows between board members, board

committees and senior management, as well as fostering eectivewor*ing relationships between executive and nonexecutive directors$

Bv -eveloping a proactive relationship with board members, and being an

independent and impartial source of information, advice and support$Bvi(lanning and organising director induction programmes and continuous

professional development programmes to refresh directors' s*ills and*nowledge$

Bvii

1upporting the process for the board to underta*e formal annualevaluation of its own performance and that of its committees andindividual directors$

AccountabilityBviii

9aving a detailed *nowledge of, and advising on, the board'sresponsibility to present a fair, balanced and understandable assessment

of the company's position and prospects in annual and interim reportsplus other sensitive public reports and reports to regulators$

Risk ManagementBix

Assisting the board in an annual review of the eectiveness of thecompany's ris* management and internal control systems including0nancial, operational and compliance controls$

Relationship with shareholdersBx Ensuring the board *eeps in touch with shareholder opinion on a

continuous basis$ and

Bxi )anaging the convening and conduct of the A#) and using it as anopportunity to build and strengthen relationship with shareholders.


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or a more eective implementation of corporate governance in the board,the company secretary needs to wor* closely with the chairman to addressany situations hindering good corporate governance practice in the

boardroom. The company secretary also needs to be independent, impartialand free from any pressure on the part of board members to be able to ful0llthe corporate governance roles eectively.


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Assessing board per"ormanceThe board of a company is generally expected to ful0l certain roles, includingproviding entrepreneurial leadership for the longterm success of the

company within a framewor* of prudent and eective controls. 9owever,boards do not always meet the expectations of sta*eholders in terms ofperformance, which may lead to corporate failures. Assessing the board'sperformance on a regular basis is therefore imperative for a company's goodgovernance and success.

The board's performance can be assessed from the following"Chairperson#s leadership3hether the chairperson is"

Bisetting the board's agenda based on value creation and achievingstrategic ob&ectives$

Bii

ensuring that adeuate time is available for discussion of all agenda

items, in particular strategic issues$Biii promoting a culture of openness and debate by facilitating the eective

contribution of board members and fostering constructive relationsamong the board$

Bivensuring that the directors receive accurate, timely and clear informationto facilitate board discussions$

Bv ensuring eective communications with shareholders and sta*eholders$Bvi catering for the continuous development of all board members$$oard Composition and Succession lanning3hether"

Bithe board and its committees have an appropriate balance of s*ills,experience, independence and *nowledge to enable them to dischargetheir duties and responsibilities eectively$

Biithere is a formal, rigorous and transparent procedure for the appointmentof new directors, based on ob&ective criteria and merit$ and

Biii

there is an appropriate succession planning to ensure that the board hasthe right mix of s*ills and experience at all times.

$oard Engagement and %evelopment3hether"Bi

board members are able to allocate suFcient time to the company to

enable them to discharge their responsibilities eectively$ andBii

board members receive suFcient induction and refresher training to helpthem understand the business of the company and their responsibilities asdirectors.

$oard dynamics3hether"Bi

the board is supplied with high uality and accurate information in atimely manner to enable it to ma*e decisions more eectively$

Biiprofessional advice is sought to assist the board to ma*e decisions forcomplex, contentious or businesscritical issues$

Biii

there is open and constructive debate and challenge during boardmeetings, within an environment of trust and appropriate boardroom


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etiuette$Biv

suFcient time is allocated for reection and consideration of alternativesduring the decisionma*ing process$

Bvthe board is able to balance commercial imperatives and shorttermperformance with corporate responsibility and longterm stability$ and

Bvi suFcient attention is given to ris*, especially in cases where the level ofris*s involved in a pro&ect could endanger the stability and sustainabilityof the company.

$oard Evaluation3hether"Bi

the board underta*es a formal and rigorous evaluation of its ownperformance and that of its committees regularly, to addressshortcomings in the chairman's leadership, board composition, successionplanning, board development, board engagement and board dynamics.

!n assessing the board's performance, both uantitative and ualitativemethods should be used. 3hile uantitative methods, such asuestionnaires, will provide speci0c and measurable results, ualitativemethods, such as independent observation, can provide a richer picture ofboard's performance and complement the uantitative information obtained.


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,e.assessing the role o" the ris+ committeeCorporate failures are often attributed to the board's inability to recognise theunderlying ris*s faced by a company, and to ta*e appropriate measures to

manage those ris*s. As the responsibility of ris* management is oftendelegated to a ris* committee, a corporate failure is thus a reection of thefailure of the ris* committee. or a more eective ris* management, ris*committees are expected to do the following"

-iscuss the ris* appetite of the company in con&unction with the management teadetermine the ris* management ob&ectives and strategies, ta*ing into account the curreprospective macroeconomic, 0nancial and legal environment$%eview the entity's ris* management infrastructure and control systems to ensure thare capable of ful0lling the ris* management ob&ectives and strategies, and that theyboth uantitative and ualitative information to the board on the company's ris*s$

%eview the adeuacy and security of the company's arrangements in terms of whistleand suspicious transaction reporting. The committee shall ensure that these arrangallow for independent investigation of such matters and appropriate follow up action$Ensure that ris* assessment is carried out regularly throughout the entity, as partenterprise's ris* management ob&ectives$Communicate regularly with the board of directors and senior executives, including tand Chief %is* OFcer B4C%O', on matters related to ris* management$Oversee the C%O's role and responsibilities$)onitor ris*s faced by the entity by analysing the periodic reports from the C%O and pappropriate measures accordingly, including investigations on the company's activity$Ensure that appropriate advice is provided to the board before a strategic decision is

particularly on the ris* aspects of the decisions. 3here appropriate, ensure that thesee*s external professional advice on strategic decisions$ and%eview the performance and terms of reference of the ris* committee annually. This iassessing whether the ris* committee is able to perform its functions eectivelyaccordance with the relevant laws, regulations and best practice. )embers of tcommittee should also be given appropriate and timely training on ris* management.

%is* committees do not ma*e decisions as such, but only advise and enablethe board to ma*e better informed decisions collectively. The ultimatedecisionma*ing authority and accountability thus remain with the board andthe latter needs to ensure that the recommendations of the ris* committee

are translated into appropriate actions for the ris* management system to beeective. The company secretary also has a ma&or role to play in that respectby facilitating the ow of information between the board and the ris*committee.


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:oard !ntegrity

A company's integrity is critical to its reputation and business, and helps toavoid corporate scandals due to lac* of good faith, care, loyalty and ethics onthe part of its oFcers. !mproving a company's integrity is thus a crucial tas*,and the best way to promote integrity across an organisation is to start byimproving the board's integrity.

A board's integrity may be improved by the following"

$oard composition

BiAppointing and retaining board members who possess ualities such as high lpersonal integrity, ethics, independence of mind and &udgment, emotional intelligen*nowledge of legal and corporate governance issues$

Bii-eveloping an appropriate succession planning, especially in familyowned comwhereby there would be a tendency to appoint family members to the board witho

regard to the ualities and s*ills reuired to ful0l the duty of a director$

&iduciary duties

BiiiEnsuring that all board members act in good faith, and ma*e wellinformed, pconsidered and ob&ective decisions which are in the company's best interests$

BivAssessing and addressing any actual or perceived conict of interests, whether the in

involved are personal interests, interests of the persons who appointed the direcpressure from lobbyists$

Corporate Culture

Bv:uilding and maintaining an ethical, legally compliant culture by establishing processprocedures for preventing and detecting violations of laws, regulations, govedocuments, and various company policies and codes of ethical conduct$

BviAssessing the eFcacy of those processes and procedures, and ta*ing remedial


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accordingly$

Risk oversight

Bvii5nderstanding comprehensively the corporate ris* pro0le and putting in place apprsystems and procedures to address those ris*s$

Bviii Ensuring that ris* management units have the appropriate visibility, statur

independence to raise ris* issues, and to prompt management and board respontimely manner$

Stakeholder engagement

Bix)a*ing and communicating decisions in a transparent manner so as buildrelationship between the company and its sta*eholders$ and

Bx1ee*ing to understand sta*eholder concerns and views on dierent corporate mincluding director nomination process and company performance issues, and demonsa willingness to engage with sta*eholders to address those concerns.

!mproving the board's integrity is an ongoing process which reuires collective asindividual eorts on the part of board members. The company secretary and chairmassist the process by monitoring the board's progress in improving its integrity andappropriate recommendations.


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Company Secretarial TipsBoardroom Eti/uette

The board is the central mechanism responsible for developing andimplementing a company's strategy through eective decision ma*ing. The

board's capacity to ma*e high uality and informed decisions is oftenimpaired due to poor boardroom behaviours on the part of directors who usemobile phones and other electronic device during the meeting, arrive late,converse with colleagues on nonboard issues, come unprepared at themeeting and demonstrate inappropriate conduct, to name only a few. !t isthus imperative that board members regulate their behaviours throughappropriate boardroom etiuette to ensure that the board ful0ls its roleeectively.1ome ways for directors to have appropriate boardroom etiuette are asfollows"$efore the meeting

Bi :eing clear on the purpose of the meeting and the contributiBii #oing through the board papers and reuesting for any clariBiii (reparing uestions and issues to be discussed during the mBiv )a*ing necessary arrangements to arrive at the meeting on

%uring the meetingBv Avoiding use of mobile phones or other electronic deviceBvi %efraining from gossip or nonboard conversation duringBvii ocussing on the agenda items so as not to divert the atBviii =istening attentively and respectfully to others, ma*ingBix Avoiding any pursuance of selfinterest and thin*ing only

Bx Contributing to the board discussions by raising relevantBxi :eing open to challenge and debate, and accepting diveBxii :eing aware of any inappropriate body language whichBxiii Attending the entire meeting !f there is some urgency a

The responsibility to follow boardroom etiuette rests with each individualboard member. 9owever, the chairperson also has a leading role to play forensuring that every director demonstrates the right boardroom etiuette.irstly, the chairperson himself needs give the example by displaying theappropriate boardroom etiuette. 1econdly, with the assistance of thecompany secretary, the chairperson needs to ta*e account of any breach of

boardroom etiuette and discuss same individually with the directorimmediately after the meeting.


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%aising the status of company secretaries

Over time, the role of company secretaries has evolved. They are now incharge of a plethora of dierent tas*s, ranging from the basic responsibility oforganising meetings and ta*ing minutes to more sophisticated tas* li*e beingthe conduit of information to the board. 9owever, this evolution has notnecessarily brought about an elevation in the status of the companysecretary. The next evolution may therefore be in that sense.

There are several ways how the status of company secretaries can beelevated. These include"

2. Changing the mandate D the role of the company secretary is oftenviewed as revolving around administrative tas*s such as preparing meetingsand ta*ing minutes. The company secretarial department also sometimesbecomes a dumping ground for responsibilities which cannot be assignedelsewhere, which further diminishes the status of company secretaries.9owever, in the current context whereby good corporate governance isinternationally becoming more and more of an exigency, company secretarieshave the potential to become high level board advisors on corporategovernance issues and to thereby inuence the decision of the board.

7. -eveloping commercial acumen D Company secretaries may often beseen as scaremongers who focus purely on administration and compliance,while being oblivious of the business and commercial aspects of anorganisation. :y developing more commercial acumen, company secretariescould transform themselves from being seen a barrier to becoming anenabler to the board, proposing businessfriendly solutions rather than &ustraising alarms on compliance issues.

8. !ncreasing the visibility D One of the reasons why the role of a companysecretary might not be highly regarded is because not everyone in anorganisation *nows exactly what a company secretary does. :y developingpeople s*ills and communicating with other departments, companysecretaries can increase their visibility and at the same time add value byassisting other departments on issues such as corporate governance.

;. -eveloping strategy s*ills D Hery few company secretaries manage toreach the executive committee level where they would be involved in thestrategy development of the organisation, simply because they lac* thenecessary strategic s*ills. To reach that strategic level and thereby gain ahigher status, company secretaries would thus need to move their focus fromadministrative to strategic s*ills, in addition to developing people s*ills andcommercial acumen.


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This would also help to value the role of the company secretary as a standalone function, and would discourage the current practice of combining therole of company secretary with that of general counsel, head of legal ordirector of 0nance.

5ltimately, whether company secretaries gain a higher status will depend onhow the board values their role. 1ome boards might be reluctant to extendthe role of the company secretary beyond the administrative and complianceaspects. As such, company secretaries' recognition to a higher status willdepend on their ability to demonstrate that they can add value beyondadministrative eFciency, and that they can stri*e the right balance betweencarrying administrative and strategic tas*s.


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Company 1ecretarial Tips

(romoting 1hareholder Engagement

!n our current crisisridden economic landscape, much importance is beinggiven to shareholder engagement as an element of good corporategovernance practice, especially with respect to institutional investors li*einvestment 0rms, mutual funds and collective investment schemes.1hareholder engagement often coined as shareholder stewardship refersto shareholdersI commitment to act as responsible owners of the company inwhich they invest, and includes pursuing purposeful dialogues on strategy,performance and ris*s with the board of the investee companies. Eectiveshareholder engagement helps to reduce the ris*iness of investments,thereby promoting sustainable, longterm wealth creation, and ultimatelymay help to maintain the 0nancial soundness of an economic system.

1hareholder engagement is also about the regular monitoring of the investeecompany, which involves the following"

Bi Attending general meetings of the investee company to discuss strategicperformance and ris* issues, and *eep records of votes cast at those generalmeetings and of the reasons behind the voting$

Bii Addressing any corporate governance issues that may arise in theinvestee company with respect to the following" a. Transparency and performance including the level and uality oftransparency, the companyIs 0nancial and operating performance, signi0cantstrategic issues, substantial changes in the 0nancial or control structure ofthe company, and the accounting and auditing practices of the company$ b. :oard structures and procedures including the role, independence andsuitability of nonexecutives directors, the uality of succession practices andprocedures, the remuneration policy of the company, conicts of interest withlarge shareholders and other related parties, the composition and adeuacyof the internal control systems and procedures, the composition of the auditand remuneration committees$ and

c. %esponsible investment #iving appropriate consideration toenvironmental, governance and social issues when ta*ing decisions oninvestments.

Biii Establishing clear policies on how to exercise shareholdersI rights,especially as regards voting and when to intervene when there are concernsabout the investeeIs strategy or performance. !ntervention methods couldinclude the following" a. 9olding additional meetings Bapart from general meetings with themanagement of the investee company to discuss concerns$

b. 9olding meetings with sta*eholders, li*e company advisors, ban*s,creditors etc$


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c. )eeting the chairman and independent directors$ d. !ntervening &ointly with other shareholders on particular issues$ e. 1ubmitting nominations for the appointment as director of the investee$and f. Adding items to agenda, submitting resolutions and reuisitioning

meetings.

Biv )itigating conicts of interests arising out of other business relationshipswith the investee apart from that of being shareholder. This might include, forexample, situations where a director sits both on the board of the shareholderand the investee.

There are several factors which can hinder the implementation of eectiveshareholder engagement and therefore need to be addressed beforehand.

These may be"

Bi 1horttermism which is due to an overemphasis on shorttermperformance measures as a result of pressure from investors, analysts and anincreasingly competitive 0nancial mar*et to achieve rapid gains$Bii Complex and fragmented foreign share ownerships which ma*es itdiFcult to communicate eectively with all investees$Biii Excessive intermediation the interposition of too many intermediariesfor a particular investment might result in a misalignment of ob&ectives dueto the dierent business models adopted by asset managers. or example,investment ban*s are remunerated on transactions, mar*et ma*ers on

trading, and fund administrators on volume of business, which is all at theexpense of shareholder engagement$ andBiv =ac* of human resources to monitor and enter into dialogue with theinvestee company.

1hareholder engagement should not be considered as a mere complianceexercise, but should instead be a proactive and consistent endeavour on thepart of shareholders to increase the longterm value of the company. Theimplementation of shareholder engagement might be costly and timeconsuming to some investors, but in the longterm eective shareholderengagement in fact results in higher and more sustainable investment

returns.


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)anaging corporate governance disputes

Corporate governance disputes refer to disputes relating to the board'spowers and actions, or its failure or refusal to act. This includes disputesamong members of the board, between shareholders and the board, orbetween other sta*eholders Bemployee and community representatives,social activists etc and the board. !f not managed eectively, these disputescan lead to costly legal suits and can have disastrous eects on a company'sreputation, operations and mar*et value. !t is thus imperative for the board todevise appropriate policies to manage corporate governance disputes.

:efore devising appropriate policies for managing corporate governancedisputes, the board needs to be aware of the causes of such disputes.Corporate governance disputes may arise in the following situations"

$oard disputes

i. Adopting new business strategies D directors' views on the choice andimplementation of new strategies may dier and lead to disputes$

ii. Crisis situations Be.g. company being in bad 0nancial conditions,restructuring exercises, employee stri*es etc D each board member mayhave his/her own view on how to respond to a crisis situation, which may

result in board disputes$

iii. Changes in board composition D having a signi0cant number of newboard members or board members appointed by dissident shareholders canincrease the ris* of creating board disputes, as the directors can ta*e sometime before being able to wor* together and understand each other's views$

Shareholder disputes

iv. 1hareholder activism D shareholders are now becoming more and moreconcerned about the board's performance, remuneration and bonuses ofdirectors and senior executives, nomination of directors, the uality ofdisclosure of 0nancial information by the board, and compliance withcorporate governance best practices. !f shareholders are not satis0ed withthe aforementioned, disputes may arise between shareholders and theboard$

v. )ergers and acuisitions D the ensuing changes in the businessstructure, culture and dynamism, and the terms and conditions of the merger

and acuisition can be a source of dispute among directors and shareholders$


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1etting the right compliance culture

!n the absence of a right compliance culture, an organisation can be prone tounethical behaviours. The conseuences of these unethical behaviours canprove to be disastrous to a company's reputation and viability, and can ma*ea 0nancial system unstable. %ecent ban*ing scandals are evidence of this. Asa response to these scandals, regulators around the world are starting to putpressure on organisations to clamp down on unethical behaviours and to setthe right compliance culture. !t is thus imperative that :oards start ta*ingresponsibility for setting up an eective and sustainable compliance culture.

The main problem that organisations face is not actually an absence ofcompliance culture, but rather that the culture in place is dysfunctional.

There are several reasons why a compliance culture may be dysfunctional,including the following"

i. A rulesbased approach to compliance D whereby compliance issues aretreated as mere steps in a mechanical process and tic*box exercise, ratherthan being a continuous and strategic process to guide decision ma*ing,behaviour and the conduct of business$

ii. 4-oing the )inimum' attitude D which focuses only on complying withthe minimum reuirements of laws and regulations and overloo*s the wider

impacts of the behaviours and attitudes within the organisation$

iii. 1eeing compliance as a uantitative reuirement Bhow much needs tobe done in order to comply with the word of the law, rather than aualitative one Bhow it needs to been done in order to comply with the spiritof the law and change organisational behaviour positively$

iv. Creating the wrong environment D whereby compliance is presented asa routine, periodic process, and the compliance trainings lac* suFcientcreativity and instructional design to engage employees in the compliance

process. Compliance is then seen as being pushed upon employees and thiscreates a negative environment which is counterproductive to an eectivecompliance culture.

v. An absence of organisational values or values which have not been wellarticulated which means that employees do not have a benchmar* againstwhich they can measure their actions, decisions and behaviours in theorganisation.

1etting an eective and sustainable compliance culture is an ongoingprocess and reuires continuous eort from all levels of an organisation.


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The shift to paperless meetings

)ost directors *now all too well about the trouble of carrying and goingthrough heavy and cumbersome board pac*s during and after boardmeetings. Company secretaries also usually complain about the hectic,tiresome and stressful process of preparing timely board pac*s for alldirectors. !t is no wonder then that some companies have tried to 0gure outan alternative to the time and resource consuming, traditional method ofpreparing paper board pac*s, thereby shifting towards paperless meetings.

The implementation of paperless meetings for some companies is also aresult of the 4go green' movement which is becoming more and more popularnowadays. (aperless meetings are indeed becoming such a cra+e now that,at one point in time last year, there was a shortage of Apple's 4!pad' D thetablet most commonly chosen for paperless meetings D due to high demandsfrom companies.

The reason behind the success of paperless meetings lies in the bene0ts andadded value that they bring to both directors and secretaries, which are asfollows"

i. -irectors do not need to carry cumbersome board pac*s, especiallywhile travelling. They only need to bring their tablet, li*e 4!pad', in which alldocuments and information would be uploaded in real time on virtual boardplatforms such as 4:oardpad'. The absence of paper board pac*s also impliesmore space on the table, which ma*es for a more comfortable environmentfor directors$

ii. There is an increase in the uality of information available to the boardas last minute revisions and updates to documents can be uploaded on thevirtual board platform in real time and the information is available to thedirectors on their tablet, even if they are oJine and travelling. This meansthat directors continuously have access to company and board information,thereby helping in eective decisionma*ing$

iii. The transition to paperless meeting is usually smooth as minimumtraining is reuired. This is because most software applications for virtualboard platforms are userfriendly and intuitive, and can store high volumes of

corporate data. As such company secretaries and directors get used topaperless meetings very uic*ly$

iv. eatures such as annotation, comment, circling, amending etc, areavailable on most virtual board platforms, which means that directors wouldbe able to annotate, comment and correct documents &ust as they wouldhave done with paper board pac*s$

v. There is an increase in the productivity and eFciency for thepreparation of board pac*s, as there is no need to go through the costineective process of mobilising a large number of sta for the printing,organising and arranging of piles of papers into board pac*s$

vi. There is a uic*er and more eFcient delivery of board documents as

there are no delays due to problems with printers or with the despatch ofdocuments$ and


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vii. Adopting paperless meetings is also a step forward to being moreenvironmental friendly by reducing paper usage, thereby improving theimage of the company in terms of its corporate social responsibility.

(aperless meetings bring more valueadded when the technology of virtual

board platforms is used in a dynamic way and as a tool for managing andexploiting documents which then improves the dynamics and decisionma*ing of the board rather than using it &ust as an ereader for postingdocuments. 5ploading too much documents on the virtual board platformmay also overwhelm directors with too much information, which is thendetrimental to eective decisionma*ing. Another concern with paperlessmeetings is the security of con0dential data on the virtual platform beingused, but this can usually be addressed by creating trusted businessrelationships with the virtual service providers. As such, there seems to be ageneral consensus that, despite some scepticism about its real bene0t andviability, paperless meetings ma*e the lives of directors and secretaries

easier.


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closed vacuum, thereby missing opportunities from new ideas andconstructive change$

iv. belittling and intimidation of board members, which closes the door toopen discussions and participation by all board members$

v. overpossessiveness by board members who believe that the

organisation cannot survive without them and who, in doing so, prevent theorganisation from moving on$vi. longserving board members who are veterans in the company but who

rarely contribute to board discussions, and are only there to achieve uorum$vii. members who serve on so many committees and are directors in so

many organisations that they are never sure in which meeting they arecoming and complain about their busy schedule during the meeting insteadof contributing to discussions$

viii. board members who loo* at each issue from every conceivable, andsometimes unimaginable angle, challenge every little proposition and raiseirrelevant issues, thereby paralysing the board's decisionma*ing process$

ix. members who have their own hidden agendas and for whom promotingthe success of the company is not necessarily their priority$ andx. overadmiring board members, who will never uestion the

performance of other board members, and whose contribution to the boarddiscussions is limited to expressions of gratitude and admiration.

(romoting board development can be a diFcult tas*, especially when theboard does not have an enthusiastic learning culture and there is resistancefrom board members. As such, the chairman has a pivotal role to play inoverriding the diFculties in promoting board development by fosteringenthusiasm for board development in all members. The company secretary

also has a supportive role in the implementation and organisation of boarddevelopment, namely by helping the board in the development of itsob&ectives, suggesting innovative development opportunities and monitoringthe whole development process. Above all, board development needs to bepragmatic, produce real change, and be adaptive to the board's specialneeds, for it to be successful.


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The evolution of the Company Secretary


'ompany secretaries have always been an important part of a company(s governance structure.

)owever, in the past few years there has been a noticeable change in the ob description of

company secretaries in terms of their title, roles and qualities. This has been mainly due to

increased e"pectations on company secretaries in terms of ensuring good corporate governance

and thereby avoiding corporate scandals and boardroom failures.

Job title

Due to the negative clerical perception associated with the nomenclature *company secretary(,some organisations are now renaming the ob title as *governance professional(, *governance

director( or even *chief governance officer(. This change in ob title and the ensuing

responsibilities promotes the raising of the status of the company secretary, who is now being

considered on an equal footing with other officers of an organisation.

Roles and responsibilities

'ompany secretaries are e"pected to be polymaths, as they need to have a wide knowledge on

several aspects and need to play the following roles concurrently:

+. Trusted board advisor % company secretaries are e"pected to be the confidential sounding

board and advise the chairman and the board on legislative, regulatory and governance

requirements, including disclosure requirements and effective board practices.

. 'ommunications and liaison officer % the company secretary is the main point of contact for

the chairman, board members, shareholders and other stakeholders and has therefore an

important role to play in terms of communication and liaison.

. verall governance professional % the company secretary needs to ensure that the company is

complying with all legal, regulatory and corporate governance requirements.

/. 0atchdog % company secretaries are e"pected to point out any issue or shortcomings with

respect to any non-compliance with laws1regulations or issues with shareholders or stakeholders to

the board. In their capacity as liaison officers, company secretaries are well-placed to be the

watchdog of the organisation as they can receive feedback from board members, shareholders and

other stakeholders.

Qualities and attributes

To fulfil the above roles and responsibilities, company secretaries should possess certain qualities

and attributes. These are:


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+. Integrity and trust % the company secretary has access to very confidential information on the

organisation and therefore there is a high e"pectation in terms of the integrity of the company

secretary and whether the latter can be trusted by the board.

. Deep understanding of the business and thorough knowledge of legal, regulatory and

corporate governance requirements.

. 2oardroom presence and emotional intelligence % the company secretary should be confident

enough to raise issues at the board, but at the same time he1she should be patient, tolerant and

humble so as to get a point across without offending any director.

/. Independence % the company secretary can be overwhelmed with pressure and feedback from

several parties including board members, shareholders and other stakeholders. )owever, he1she

needs to have an independent view and raise any issues which eopardise the good governance of

the organisation.

In light of the above, it is clear that the e"pectations on company secretaries are high and that

their roles and responsibilities are beyond the traditional tasks of minutes taking and meeting

organisation. 'ompany secretaries of today should thus ensure that they acquire and develop all

the required qualities to enable them to fulfil their duties effectively and efficiently.


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The changing role of the company

secretaryFocus on governance

As the importance of effective corporate governance continues to be critical

in todays environment, not least due to the global financial crisis, there has

been increased focus on the role of the company secretary in Ireland.

Corporate Secretarial Services assists clients to manage and mitigate risks of corporate non-

compliance. Innovative techniques coupled with years of professional eperience help ease

administrative burdens across functional and geographical boundaries.

IntroductionMost notably, the Companies Bill 2!2 recently retained the need for a company secretary in

both private and public companies. The responsibilities of the modern day company secretary

have evolved from that of a "note ta#er$ at board meetings or "administrative servant of the

Board$ to one %hich encompasses a much broader role of acting as "Board advisor$ and having

responsibility for the organisations corporate governance.

The Board, particularly the chairman, relies on the company secretary to advise them not only on

directors statutory duties under the la%, disclosure obligations and listing rule re&uirements but

also in respect of corporate governance re&uirements and practices and effective board

processes. This specialised role of the modern company secretary has emerged to position them

as one of the #ey governance professionals %ithin the organisation.

Statutory responsibilities

The Companies Bill 2!2, %hich %as published last 'ecember and is

e(pected to be enacted at the earliest in 2!), retains the re&uirementfor a company secretary unli#e the *+ legislation %hich eliminated


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this re&uirement for private companies in 2. The retention of this

re&uirement demonstrates the importance of the role of the company

secretary in the eyes of the legislature and in fact the proposals go a

step further by placing the responsibility on the Board of directors to

ensure that the secretary has the re&uisite #no%ledge and e(perienceto discharge the functions of secretary of the company and to

maintain the records as re&uired by the Bill. -urthermore, the

company secretary %ill be re&uired to sign a declaration

ac#no%ledging the e(istence of the secretarys duties on appointment.

If one %ere to e(amine the role and duties of the company secretary as currently outlined in Irish

legislation it %ould appear to be &uite restrictive and mainly administrative in nature. rincipally,

the company secretary ensures the company complies %ith company la%, maintains certain

statutory registers and ma#es the necessary filings %ith the /egistrar of Companies such asannual returns, financial statements and certain forms %ith respect to changes to share capital

etc.

Corporate governance

In practice, the role of the company secretary has developed into much more than the basic

statutory re&uirements outlined above. Most notably, the responsibility for developing and

implementing processes to promote and sustain good corporate governance has fallen largely%ithin the remit of the company secretary. This is recognised in both the *+ Code of Corporate

0overnance 1%hich has been adopted by the Irish toc# 3(change through the Irish Anne(4 and

the -/C 0uidance on Board 3ffectiveness. Both have served to focus companies on Board

effectiveness and in turn ho% they can be assisted by the company secretary. Although this

guidance applies to listed companies, it is seen as best practice and these standards of

corporate governance should be adopted by other companies in so far as they are considered

appropriate to the nature and scale of the organisation.

The dynamics of the boardroom are changing and chairmen and directors are realising that they

need specialist s#ills and technical #no%ledge in this area and they are loo#ing to company

secretaries to provide this e(pertise. There are a number of responsibilities, some of %hich have

been e(plicitly referenced to in the above guidance, %here the company secretary can assist and

add value5

Organisational governance

It is important that robust governance arrangements are in place, are clearly documented and

communicated to the organisation. The position of the company secretary enables them to have

a holistic vie% of the governance frame%or# and as a result they are generally tas#ed %ith the

responsibility of ensuring that this frame%or# and any supporting policies and procedures are

clearly documented. This should include ensuring that the formal documentation re&uired under

the *+ Code of Corporate 0overnance, such as schedule of matters reserved for the Board, is in

place.


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Increased burden of

regulationIn the light of economic developments in recent years sta#eholders of companies, particularly in

the financial services sector, are increasingly concerned %ith the conduct of the affairs of the

company and therefore it is essential that best practice is adhered to at all times and evidence is

available to demonstrate same. The re&uirement for higher standards in this sector can be

further evidenced by the introduction by the Central Ban# of a series of corporate governance

codes including fitness and probity standards for certain pre6approval controlled functions or

persons %ho perform controlled functions. Controlled functions include "ensuring, controlling or

monitoring compliance by a regulated financial service provider %ith its relevant obligations$.

7hile the monitoring of compliance in the financial services sector has traditionally been

outsourced %ith the introduction of these ne% standards there is more caution in the provision of

such services %hich are more li#ely in the future to be laid at the feet of the company secretary.

It is true to say that the role of the company secretary also includes #eeping the Board informed

of ne% legislation and ho% it applies to them. 7ith this increased focus on corporate governance,

the role of the company secretary has been e(tended such that the secretary is no% seen as the

guardian of the companys compliance %ith legislative re&uirements and best practice.

Conclusion

The focus of the company secretarys responsibilities %ill differ depending on the type of

company, %hether it is public or private, and also depending on the industry. 8o matter %hat the

organisation ho%ever, the role has e(panded beyond simply ensuring statutory compliance to

become a pivotal one %here the s#ills of the company secretary can have a direct impact on the

effectiveness of the Board and organisation. Company secretaries can add real value to their

role and increase their impact by bringing commercial acumen, strategic understanding and

softer people s#ills in addition to their already much sought after legal and governance

#no%ledge.

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