The recent firing - and swift rehiring - of OpenAI founder Sam Altman is a business school case study on the importance of corporate governance.
The general sense is that having a reputable and trustworthy Board doesn’t automatically lead to good governance without a robust risk-management framework, particularly as AI and other emerging risks transforms the way businesses operate.
Both the UK Corporate Governance Code and FRC Guidance have served to focus companies on Board effectiveness, with the FRC’s mission being to promote transparency and integrity in business.
Effective corporate governance continues to take center stage amid emerging challenges posed by the rise of GenAI and looming regulatory changes. In the UK, the Economic Crime and Corporate Transparency Act requires improved transparency over corporate entities; while the Corporate Transparency Act (CTA) subjects smaller domestic and foreign entities in the US to the same level of Beneficial Ownership Information (BOI) reporting regulations as larger corporations.
In turn, the role of the modern day corporate or company secretary (co-sec) has come into sharper focus and demand. Major adjustments are needed to stay ahead of the curve, particularly as the Securities and Exchange Commission (SEC) disclosure requirements continue to evolve.
The evolving role of company secretary
In principle, a company secretary, or company secretarial team, is entrusted with board compliance and protecting shareholder value by helping the board avoid regulatory risks and maintaining communication lines between the board and investors, as well as maintaining statutory registers/records and making necessary filings (annual returns, financial statements etc.). However, in practice, the role has evolved to encompass a much broader spectrum of responsibility and oversight, not least the implementation of, and continued adherence to, good corporate governance practices.
As a reaction to the increased complexity and importance of the role, there have been rumblings of a revolt against the reductive nature of the job title ‘Company Secretary’ or ‘Corporate Secretary’, particularly among younger generations operating within the corporate governance space.
After all, company secretarial teams are not just Board servants and meeting note takers: these are the people discreetly ensuring the Board of Directors stay on the right side of the law, saving the company from potentially crippling hefty fines for regulation infringement and directors from breaching their fiduciary duties. Given that the former Institute of Chartered Secretaries and Administrators (ICSA) was renamed as the ‘Chartered Governance Institute’ in 2019, ‘Chief Governance Officer’ is perceived as a much more fitting title for modern company secretaries; professionals who have been through years of intensive training, often on top of a related degree, such as Law - only to be mistaken for the tea-maker.
Yet a rose by any other name would have the same – often undervalued and misunderstood - strategic and advisory importance. With risk management high on the corporate agenda, company secretaries are faced with the growing complexity and volume of regulation and compliance requirements, and increased expectations and scrutiny from stakeholders. Boardroom dynamics are shifting with chairpersons and directors acknowledging that they need specialist skills and technical knowledge in this area, and they are looking to company secretaries to provide this expertise.
Against a backdrop of increased shareholder activism, volatile geopolitical tensions, unprecedented levels of cyber-threat and the emergence of new, as yet unmapped, AI technology, demand for company secretaries has increased, while the regulatory landscape continues to evolve.
Reducing co-sec busywork
Despite this, the perceived value of co-sec work has not risen in tandem with demand, particularly within larger organizations, where education, awareness and advocacy for the commercial role of the company secretary can be hidden under the broad ‘compliance’ blanket. Company secretarial teams face competing dynamics of budget and headcount restraints, and a challenging recruitment and retention market.
This tug-of-war goes beyond FTSEs clinging to the wording ‘Company Secretary’ as public sector and private companies refresh the job title, as it is evidenced in the comparably small budgets for in-house or third-party company secretarial work versus other legal, brokerage and accountancy services. Ultimately, this is due to a lack of data to support a business case for investment to transform the co-sec function.
A reluctance to adequately fund co-sec activity means in-house corporate governance professionals are often prevented from focusing their attention on their core advisory function. Their time can be largely consumed with low-value administrative or repetitive manual tasks – adding a challenge to morale, recruitment and retention – and taking focus from the valuable strategic aspects of the role.
This self-fulfilling prophecy affects the perceived value of the co-sec team by stakeholders, who are dismissive of the more administrative activities.
A reimagining of company secretarial work is needed to increase the efficiency of governance functions and create a culture of risk awareness and accountability. To be effective, that new order must include essential elements, such as:
Establishing trust and collaboration
For organizations who have successfully transformed their company secretarial function, there is trust and collaboration between co-secs, the management team and the Board.
Importance is placed on entity management through the entire governance life cycle, from inception right through to dissolution, with clarity on governance requirements along the way (board and shareholder meetings, as well as ad hoc governance meetings).
In practice, good governance boils down to having visibility of what you need to do, when you need to do it and where you need to do it. But as the corporate governance space evolves, organizations need to quantify co-sec work to drive real, measurable and demonstrable change.
Where organizations have implemented a technology-enabled managed service solution, the in-house governance team is freed up to focus on activities where they can add real value.
Any future vision of your co-sec function needs to start with the challenges and experiences of your in-house governance team, and their valuable insight and data. It also requires a cost-effective, flexible and sustainable resourcing model.
This provides the foundation for maintaining and improving your compliance and review processes, in order to keep your corporate entities in good standing, sustaining financial stability through a solid corporate governance framework.
It remains to be seen whether ‘Chief Governance Officer’ will become the standard title of the company secretary within the C-Suite, but it’s clear that transformational change is needed to increase the strategic and monetary value placed on co-sec work as we enter the era of GenAI.