The Chartered Governance Institute is running a project titled the Company Secretary as Changemaker which will run from October 2019 through to July 2020. Comprised of a series of six chapters, each session will focus on a different aspect of disruption to traditional working practices
'Governance' isn't necessarily a word that gets the heart beating faster. It sounds rather formal, heavy even. But even if the label might seem a bit grand, the subject matter – the specific practicalities of governance – could not be more important. How companies and organisations are steered and managed is under closer scrutiny than ever before. When things are going well, the outside world may not have too many governance-related questions to ask. But if there are problems...well, it would be a good idea to make sure that that the origins of those problems cannot be found in negligent or less than competent corporate governance. Because that would get hearts beating faster, but not out of a sense of enjoyment.
The UK governance scene attracts a lot of attention internationally because, as with the industrial revolution, the Brits have been pioneers. It is now almost 30 years since the publication of Sir Adrian Cadbury's report into 'financial aspects of corporate governance'. Debate and reform have been non-stop ever since. This autumn, the Financial Reporting Council published its revised Stewardship Code – guidance for investors and boards as to what responsible financial management and stewardship should look like. Currently the initials ESG are to be found almost everywhere, raised to a new level of prominence as a major board-level priority. And we all know what the 'G' stands for. These are just the latest salvoes in the ongoing discussion over the proper conduct of business and business leaders.
In this context it is inevitable that the work of company secretaries is likely to be studied more carefully than ever before as well, putting them under greater pressure. If governance is the issue then the company secretary must be involved. This could all sound a bit threatening. But of course it is, in fact, a great opportunity. Company secretaries sit at the heart of things, with unique and special access to chairs, chief executives and board directors. They know, most of the time, what is going on. If things have to change at the top – and at the moment they probably do have to change – then the company secretary is going to have help lead and steer that change. The governance orthodoxy of even a few years ago will not pass muster in the 2020s.
But how does change happen? What does it look like? Perhaps a bit like this: a room full of company secretaries and governance professionals gathered at the London headquarters of The Chartered Governance Institute one damp evening at the end of October, at the start of a nine month project to discuss 'The Company Secretary as Changemaker'.
This was the first in a series of seminars which will take place between now and next summer. We will be reporting back, both on our blog and in Governance and Compliance magazine, on the content of these discussions, culminating in a session at the Governance 2020 conference next year. It is a substantial piece of work with great significance for all.
The Opening Session
So what is a changemaker, and how can company secretaries prove themselves worthy of that title? A changemaker does not just carry out business as usual. This does not mean that a changemaker has to be an iconoclast or a revolutionary. Indeed, there is a need for continuity even while you are setting about introducing change. This is just one of the paradoxes or trade-offs that a company secretary has to negotiate.
As many participants in this opening session agreed, the company secretary has a delicate balancing act to pull off, between keeping the company show on the road while also pointing out where something different – new – ought to be tried. The governance landscape is changing, and the company secretary has to be ready to change with it. The internal changemaker tells the board: 'We are going to have to do this and here is how it is going to help'.
Bravery, then, is a key characteristic of a changemaker. If the chair turns to a company secretary and asks: 'Who else is doing this, and why should we?', a confident and convincing answer has to be found. Speaking truth to power is never easy. But then changing things isn't easy either.
Tracey Brady, Managing Director of Company Matters, partner in this project, asked a key question: are we, as governance professionals, leading, or merely reacting? Changemakers lead. A degree of self-promotion may be required to win the space to be heard. The importance and centrality of the company secretary role needs to be recognised. But for that to happen the company secretary has to – at the right moment – stand up to be counted and make his or her presence felt.
Changemakers offer solutions. Peter Swabey, Policy and Research Director at The Chartered Governance Institute, suggested that company secretaries very often have the skills a chairperson and boards are looking for – but do chairs and boards realise this? Does the company secretary have the confidence to speak up and the ability to judge the right moment to make an effective intervention?
Changemakers don't just take notes and sit silently. They are trusted advisers, who have the ear of leadership teams. The company secretary can find themselves positioned rather delicately between executive and non-executive directors, having to be an honest broker between both. They will certainly be the eyes and ears of NEDs who unavoidably will not be so close to the day-to-day business as other board members. (In fact, there was some suggestion that the company secretary can act de facto as an extra quasi-NED voice around the board table).
There is a balancing act to perform: loyalty to the company and the chair in particular, but usefulness and complete trustworthiness for NEDs. Peter Swabey spoke of the skill needed to spot the moment to have a friendly cup of coffee with the right person at the right time – a subtle but invaluable judgment call.
One attendee quoted the view once offered by Judith Hanratty, for many years the distinguished company secretary at BP. She had said that the range of duties carried out by a company secretary could vary enormously, from making sure the napkins at dinner were the right colour to helping the chair write a speech for the AGM. Andy Bord, Chief Executive at Flood Re, a reinsurance company, confirms how central the company secretary role is. As he said recently in an interview for Board Intelligence, the consultancy: 'At Flood Re,' he said, 'our company secretary keeps us honest.
Attendees at the launch meeting agreed that company secretaries have to speak up when they have concerns. As the person with a key role in setting the board agenda and deciding which issues come to the board table, the company secretary has as much power as anyone at the top to steer and bring about meaningful change. As one attendee put it: changemakers are enablers, and not merely gatekeepers. A changemaker company secretary gets past the 'no or maybe' answer, preferring 'yes, and here's how'.
None of this is easy. The apparently safe option – nod along with a complacent board even while the chair and chief executive are leading the company to disaster – might be one way of keeping your job, in the short term. But questions will be asked when things go wrong. And the company secretary will be asked questions just as much as anybody will. So the seemingly safe option is not as safe as it looks. The challenge of change cannot be ducked. And that is why we need changemaker company secretaries.
The next session in the changemaker project on 4 December will look at the company secretary's contribution to strategy. We welcome your feedback and participation in this important programme of work. You can be a changemaker too. Join in.
Stefan Stern is the former director of the High Pay Centre and author
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