PwC: Company secretaries now centre stage
Innovation Profile Role pivotal as guardian of corporate reputation when it comes to governance and compliance
Carmel O’Connor, PwC partner, with Ruairí Cosgrove, entity governance and compliance director with PwC
The popular image of the company secretary may be one of a Dickensian figure updating dust-covered registers by hand. They were viewed as people who worked in the background, recording the actual business transacted at meetings. The reality today is much different.
These days company secretaries hold pivotal positions in their organisations and frequently act as guardians of corporate reputations when it comes to governance and compliance.
“There has been a huge increase in both domestic and international regulation in recent years and this has created additional governance and compliance requirements for companies,” says Carmel O’Connor, PwC partner with responsibility for entity, governance and compliance. “Companies are turning to firms such as ourselves for advice and support as they attempt to deal with this.”
Ruairí Cosgrove, entity governance and compliance director with PwC, says the increased weight of regulation is being most keenly felt in the financial services area.
“With the introduction by the Central Bank of the corporate governance code, the onus is on financial services entities such as credit institutions and insurance companies to provide the regulator with evidence that they are compliant.
“Company secretaries need to help businesses to identify and manage the relevant risks. It is important to have strong governance frameworks in place which are supported by robust procedures in order that costly financial and reputational damage can be avoided.”
According to Cosgrove, these frameworks need to be grounded in what might appear to be the simple task of accurate minute-taking.
“For larger organisations, the accurate recording of decisions and resolutions made at board level and committee and sub-committee levels is a huge challenge”, he says, “and you tend to get two extremes when it comes to minute-taking. In the first case, you get a record of every word spoken, almost like a court stenographer’s note, and then on the other, you might get one sentence on a very complex and vitally important decision.
“Effective minutes should be clear and objective, providing the reader with an accurate report of the discussions at the meeting, the decisions taken or any actions arising from those discussions. As transparency has become key for directors and committee and sub-committee members, the role of the company secretary in this area has expanded significantly.”
This responsibility for recording decisions places the company secretary in a very central role when it comes to governance. “The company secretary is frequently the only person in an organisation who will attend all of the various board and committee meetings and, consequently, they will be the only ones who can tie everything together and identify any gaps,” Cosgrove adds.
“For example, if information from the main board should have been communicated to the remuneration committee, they will see if it hasn’t and be able to address the issue. Similarly, they will be able to ensure that the board takes note of issues raised by its committees.”
This also places them in a pivotal position when it comes to ensuring compliance in various jurisdictions.
“The company secretary is now being seen as the director of governance and compliance in many larger firms,” O’Connor adds. “If a major US multinational misses a filing here in Ireland or some other European country by just a few days and gets a slap on the wrist from the local authorities, this can be regarded by them as a major reputational issue. This again underlines the importance of the company secretary who will be the one who should know when all of the different entities within the group structure have to file and will be able to ensure that the processes are in place to have it done on time.”
The volume of paperwork created by all this activity can be enormous and larger organisations are moving towards paperless board meetings as a result – another move which takes the company secretary even further from the dusty ledger.
“You would be surprised at how many board meetings are now based on tablet computers and are effectively paperless”, says Cosgrove. “For company secretaries and other administrators, the release and distribution to board members of amended versions of documents can be a nightmare when using paper.
“New versions have to be sent out by courier, old versions frequently have to be collected for destruction, and then you have the task of ensuring that everyone is working off the same version. A paperless board and an electronic board pack can have details sent out from one central system with updates being forwarded to directors’ devices at the push of a button.”
This has considerable advantages in terms of enhanced security, ease of access to corporate information, convenience and the synchronisation of documents.
Another area where the company secretary’s role is becoming increasingly valuable is that of compliance cost reduction.
“We regularly come across groups of companies where there are a large number of dormant entities which serve no purpose”, O’Connor points out. “This can come about where a company has grown through merger and acquisition over the years and the functions of many of the acquired entities and their subsidiaries have been absorbed into the main organisation.
“However, these entities are still required to be audited, have tax returns prepared and make filings to the Companies Registration Office on an annual basis.
“Company secretaries are best placed to identify these dormant entities as they are responsible for filing returns and they can work on dissolving them to reduce costs and risks for the group.”
The role of the company secretary is set for further change when the proposed new Companies Bill becomes law. The aim of the legislation is to clarify and simplify company law in Ireland and make it easier for companies to do business here, according to Cosgrove, but there are new elements and some changes which companies need to prepare for.
“The Bill is unlikely to be enacted until late next year and there will be a transition period, but it is important for company secretaries and directors to be aware that significant changes are coming down the line in terms of company types, the codification of directors’ duties, new offences and the introduction of a mergers and divisions regime. We are already working with clients in preparing for the changes and in supporting their company secretarial role in ensuring compliance and good governance, both under the current regime and the changed one which will be introduced under the new legislation.”