Too many smaller companies do without a corporate secretary. Too many bigger ones undervalue the job. Too bad, because companies that get it, stand a better chance of getting ahead
For the past 15 years, Mary Batoff has worked behind the curtain as a corporate secretary for a handful of Canadian companies. For each one, she was the first person to fill the role, including her current position as corporate secretary and legal counsel at First Uranium Corp. (TSX:FIU). In every case, the companies had been previously tackling all the duties that fall under her purview—among them, taking board minutes, developing risk strategies and ensuring issuer regulatory and governance requirements are met—but these were delegated across a number of positions.
Enter Batoff, who centralized the myriad duties, killed redundancies, developed work processes and made the entire board and committee team run more efficiently. The greatest testimony to the value of her role and her work? Each time she moved on, the company she left hired a new corporate secretary in her place.“There’s not much of a case for going back once you’ve made the leap,” says Batoff.
What these companies undoubtedly discovered—yet what too many listed companies still don’t know or under-appreciate—is the power and potential of the corporate secretary to make every board a better board and every director a better director. In short, the corporate secretary is a not-so-hidden weapon that boards can leverage to sharpen their strategies, manage risk, check off governance boxes, and help directors focus on the most critical issues rather than getting bogged down or straying off-task.
Sylvia Groves, a principal at GG Consulting in Calgary, has more than 20 years experience as a corporate secretary.“It’s pretty hard not to have one” if you’re a mid-cap company or larger, says Groves. “By the time you finish one board meeting, you’re already preparing for the next one.” As a general rule, she adds, the more governance and regulatory issues grow complex, the greater the corporate secretary’s value. Meanwhile, the holdouts—a significant percentage of smaller Canadian listed companies—run a greater risk of legal, governance or regulatory errors as well as missed opportunities and weak decision making.
“Boards typically feel they don’t spend enough time on strategy, while management feels they spend too much,” Groves says. What’s actually happening is a lack of communication: management needs to tell the board what it’s up to. That’s where the corporate secretary comes in. Lawyer Carol Hansell, a partner at Davies, Ward, Phillips and Vineberg in Toronto, points out another important corporate secretary function: determining and resolving director conflicts of interest.“Insider reporting issues run through the corporate secretary,” Hansell says.
It’s not so much that the corporate secretary position is a new one. But in the past several years, the job has become more vital and demanding. “Things are ratcheting up for directors, and as a result the corporate secretary is moving in lockstep,” says David Masse, senior legal counsel and assistant corporate secretary for CGI group, and vice-chair of the Canadian Society of Corporate Secretaries. “The audit committee has a lot more compliance on its hands than it used to.”
Masse credits the increasingly valuable role of the corporate secretary to a collision of issues, starting with the U.S.’s Dodd-Frank Act, enacted in 2010 in response to the credit crisis, which created an entirely new set of rules boards must navigate. Combine that with a sharp focus on governance from shareholder groups such as the Canadian Coalition for Good Governance, add in the reality that many directors sit on multiple boards and committees, and you start to see why an insider with legal expertise and intimate knowledge of your board is a valuable asset.
“It’s a bit disconcerting that so many companies don’t have corporate secretaries,” says Glenn Keeling, a partner at Phoenix Advisory Partners in Toronto. “Especially given the MD&A activity in Canada’s resource sector.” As proxy and governance advisers, Phoenix works with corporate secretaries on a regular basis.“We connect with the corporate secretary around annual meeting time, but also when companies they represent come under fire, or when someone’s taking a run at the company.”
Keeling sees them as a “significant ally to our industry” because they keep boards of directors informed about what’s coming down the pipe. Tasks such as taking detailed, up-to-date and succinct minutes are vital should legal issues pop up down the line. Keeling points to Baffinland Iron Mines Corp., a mining company recently in the news as a cautionary tale. Former shareholders of the Canadian company recently launched a class-action lawsuit based on allegations of omissions and misstatements in documents. The argument: shareholders were not properly informed of all the facts ahead of a bidding war to take over the company. At the time, Baffinland didn’t have an in-house corporate secretary. It does now.
“Corporate governance went from having long periods of sameness to now, where responsibilities and roles of boards are evolving on a yearly basis,” Masse says. The solution? Hire someone that’s a quick study and attuned to legal complexities to carry out a governance and liability watch.
Smaller companies that can only afford to hire a single corporate secretary rather than a team should be sure to add value and shave costs by hiring someone with a legal background. Masse was the first full-time corporate secretary at CGI Group. He also acts as the company’s legal counsel, a not uncommon occurrence in Canada. “It’s not absolutely necessary” to hire a lawyer to do the job, Masse points out, but why not take advantage of the opportunity? In a small number of cases, corporate secretaries have begun to report to independent chairs. He expects more companies will follow suit as this “sea change” transforms the corporate secretary role.
“Outside consultants have a tough time matching the kind of skill and securities expertise at any given moment,” says Masse. Disclosure issues are routine, and “lawyers are well-equipped to make those kinds of calls.” In fact, Masse thinks that the most difficult thing a corporate secretary needs to do is to advise boards on materiality issues.“The whole field is in a state of flux right now. The TSX has one view on materiality that’s not particularly helpful. You also have the securities commissions, which have a much more nuanced, complex view, and then you have the Supreme Court, which ironed a lot of those wrinkles dead flat. That’s where the risk on directors and officers have really sharpened.”
So what tasks should directors hand over to their corporate secretary? None, really, Masse says. The roles are different, but symbiotic. “[CGI’s CS department] did such a bang-up job of insider reporting for my board,” Masse half-jokes,“that directors sitting on other boards wanted us to report on other companies as well.”
While the corporate secretary’s role is an evolving one, it’s one boards have already gotten behind; just try to find a governance conference that doesn’t include a bit about corporate secretary skill sets, Keeling points out. “They’re one of the better advisers to the board as a whole—particularly the chairman. [Chairs] rely heavily on a corporate secretary to bring them the information they need. A good one understands the business the board is overseeing, and recognizes where the pitfalls are.”
A good corporate secretary, in other words, is an expert in risk management. They can navigate through the thick fog of securities requirements and insider reporting and aren’t afraid to gently push a board member when he or she tries to dodge an agenda item. They’re also responsible for board orientation and evaluations. In terms of their actual labour, the corporate secretary sits in on every board meeting: they’re likely the only one in the room when others are asked to leave for specific discussions. As such, they have a clear view of the whole picture, and are among the best advisers a chairman has. Batoff has been asked to chime in her two cents, simply because she’s always around. A good board member knows to listen to their corporate secretary. “It’s very gratifying when your voice is heard,” says Batoff.
After two decades as a corporate secretary, Groves—a self-described “governance nerd”—says she’s learned more than a few tips along the way. For example, minutes should be taken in a less formal, reader-friendly tone using simple language so board members don’t have to spend as much time reading them, she says. Required reading often comes in dictionary-sized binders, and a good corporate secretary produces one-page memos for each item that describes the why and how of the task and outlines the documents that back it up.
Masse likens the corporate secretary role to that of a watchmaker: “You have to really have expertise in the role to understand all the linkages. You’d be surprised by how many directors—and how many board chairs—don’t get it.” They’ll glance at a meeting agenda and decide they don’t want to deal with that particular issue and try to push it to another day, another meeting. The corporate secretary—the one that plotted the year’s meeting schedule and carefully planned the agenda items—must have the confidence to push back on committee chairs and point out the consequences to each delay.
“The vast majority of directors will go through their careers and never have to manage a crisis situation,” Masse says. “So you better have someone around who understands risk, governance and the intricacies of your business when one does arise.”
Dana Lacey is a freelance writer in Toronto.