How to Choose the Best Company Secretary for Your Company
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governance
Governance How to Choose the Best Company Secretary for Your Company
Having a company secretary is critical for any medium-sized organisation aiming to maintain governance excellence and operational efficiency.
The company secretary serves as the backbone of the board, ensuring compliance with legal and regulatory requirements, facilitating effective communication among board members, guiding board reporting and upholding the integrity of corporate governance practices.
A Company Secretary meticulously prepares for and manages board meetings, maintains accurate records, and provides valuable advice on corporate governance issues. This role not only enhances the board’s functionality but also safeguards the organisation’s reputation, making it a critical component for sustained success and stability.
Identifying the best company secretary model for your organisation is a critical decision. The company secretary plays a pivotal part in ensuring an effective board. Although their role is performed quietly, it is essential for the smooth operation of the board. When considering the best model for a company secretary, there are three primary options:
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an internal full-time company secretary
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a dual-role company secretary
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an external professional contract company secretary
Each option has distinct advantages and disadvantages that must be carefully weighed to determine the best fit for the organisation.
Internal Full-Time Company Secretary
The first model is an internal resource, a full-time company secretary who is an integral part of the organisational structure.
Advantages
In-depth organisational Knowledge: An internal company secretary is (or will become) deeply familiar with the organisation and its people. This familiarity allows them to navigate the company’s internal dynamics effectively.
Professional Training: Typically, this individual is professionally trained in corporate governance, ensuring they bring a high level of expertise to the role.
Value Addition: They can provide quality assurance for board papers and coach executives on how to write better board papers. Moreover, they serve as a board and governance advisor and a confidant, adding substantial value to the board’s operations.
Disadvantages
Cost: Employing a full-time company secretary can be expensive due to the professional nature and full-time status of the role.
Independence Issues: Managing the relationship between the board and the executive team can be challenging. The company secretary has a direct reporting line to the board and an indirect one to the chief executive officer(CEO) for administrative matters. This dual reporting can create tension, particularly because the company secretary often has more information than many in the management team, including the CEO at times.
An internal full-time company secretary, integral to the organisation, offers in-depth organisational knowledge, professional training in corporate governance, and significant value addition to board operations but comes with high costs and potential independence issues due to dual reporting lines.
Dual-Role Company Secretary
The second option involves combining the company secretary role with another executive role, commonly the general counsel or chief financial officer.
Advantages
Organisational Knowledge: Similar to the first model, the dual-role secretary is well-acquainted with the organisation and its personnel.
Accessibility: Being part of the executive team, they are readily accessible and can be approached as needed.
Disadvantages
Lack of Professional Training: Typically, this individual is not specifically trained as a company secretary, which may require additional upskilling.
Time Management: Balancing the time demands of their primary executive role with the company secretary responsibilities can be challenging.
Conflict of Interest: There is a potential for conflicts of interest. As a confidant of the board, the dual-role company secretary participates in discussions that other members of the executive team are not privy to. This can create tension and requires careful management to maintain board confidentiality. This model is particularly problematic if the CEO assumes the company secretary role, as it undermines the governance structure’s checks and balances.
A dual-role company secretary, often combined with the general counsel or CFO role, offers organisational knowledge and accessibility but faces challenges like lack of specific training, time management issues, and potential conflicts of interest, especially if held by the CEO, compromising governance checks and balances.
External Professional Contract Company Secretary
The third model involves hiring a professional contract company secretary. This option is particularly advantageous for smaller organisations.
Advantages
Cost-Effectiveness: This model offers access to a trained company secretary at a lower cost than a full-time internal role.
Flexibility: The contractual nature of the role allows for greater flexibility.
Independence: An external company secretary is more independent, which simplifies managing conflicts and maintaining confidentiality between the board and the executive team.
Wider Experience: Because an external company secretary often works in the company secretary role for several organisations. This means they have a wider view of current best practices in governance.
Disadvantages
Limited Organisational Knowledge: Initially, an external company secretary may not be as familiar with the organisation.
Accessibility Issues: Depending on the contractual arrangements, there may be issues with the availability of the company secretary.
Succession and Knowledge Transfer: There might be challenges related to the transfer of corporate knowledge and succession planning.
An external professional contract company secretary, ideal for smaller organisations, offers cost-effectiveness, flexibility, and independence, but may struggle with limited organisational knowledge, accessibility issues, and challenges in knowledge transfer and succession planning.
Comparison
Internal Full-Time Company Secretary Dual-Role Company Secretary External Contract Company Secretary Organisational Knowledge High High Initially Low Professional Training Typically Trained Not Specifically Trained Highly Trained Cost High Moderate Low Flexibility Low Moderate High Independence Moderate Low High Accessibility High High Variable Time Management Dedicated Challenging Managed Conflict of Interest Moderate High Low Succession and Knowledge Transfer Easier Easier Challenging Determining the Best Model for Your organisation
Selecting the best company secretary model for an organisation requires a thorough analysis of the advantages and disadvantages of each option. Here are some key considerations to help guide this decision:
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Size and Complexity of the organisation: For larger, more complex organisations, a full-time internal company secretary might be necessary to manage the demands and provide the needed expertise. Smaller organisations might benefit more from the cost-effectiveness and flexibility of an external professional.
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Budget Constraints: Cost is a significant factor. If budget constraints are tight, an external or dual-role company secretary might be more feasible.
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Governance Needs: Consider the governance structure and needs of the organisation. If maintaining a high level of independence and avoiding conflicts of interest are top priorities, an external professional might be the best option.
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Organisational Culture: The existing culture and dynamics within the organisation should also be considered. An internal company secretary might fit better in an organisation with a collaborative culture, while an external one might suit a more hierarchical structure.
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Succession Planning: Think about the long-term implications of the choice, including how easily the role can be transitioned to another individual if needed.
Download our checklist for helping you determine which company secretary model is right for your organisation.
The Bottom Line
Company secretaries are the unsung heroes of the boardroom. The role ensures that the board operates effectively, maintaining governance standards and advising the board on critical issues. Each of the three models—internal full-time, dual-role, and external professional—offers unique advantages and challenges.
Ultimately, the best model for an organisation will depend on specific needs, resources, and governance priorities.
By carefully considering the pros and cons of each option organisations can make informed decisions that ensure effective board support and governance.
The company secretary’s role, though often behind the scenes, is indispensable to the health and success of the board, making this decision one of the most crucial for any organisation.
Additional Resources
Ensuring Your Board of Directors is Diligent
Take Your Board to the Next Level: Powerful Agenda Best Practices
A Comprehensive Guide to Achieving a Quorum
Frequently Asked Questions
What are the duties of a company secretary?
The duties of a company secretary include ensuring the company complies with legal and regulatory requirements, maintaining statutory books, arranging board meetings and annual general meetings (AGMs), recording minutes of meetings, and filing necessary documents with regulatory authorities.
What is the role of a secretary in a company?
The role of a secretary in a company involves supporting the board of directors, ensuring good corporate governance, advising the board on corporate governance matters, ensuring compliance with statutory and regulatory requirements, and managing communication between the board and stakeholders.
What are the key skills required for a company secretary?
The key skills required for a company secretary include strong organisational skills, attention to detail, excellent communication skills, a good understanding of corporate law and governance, discretion and integrity, the ability to work under pressure, and strong problem-solving abilities.
Who does the company secretary report to?
The company secretary typically reports to the board of directors. In some companies, the company secretary may also report to the chief executive officer or the chairman of the board.
What does a company secretary do?
A company secretary ensures that the company adheres to legal and regulatory requirements, maintains and updates statutory books, organises board meetings and AGMs, records and maintains minutes of meetings, files necessary documents with regulatory authorities, and provides advice on corporate governance to the board of directors.
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