The office of a Company Secretary is a unique position of considerable influence at the centre of administration and operations of an organisation. The Secretary plays an important role in ensuring the smooth administration of a company through advising and guiding the Board of Directors. This may be considered a senior position in both private and public companies. Accordingly, the promotion of Corporate Governance principles is incidentally within the scope of the responsibilities of Company Secretaries.
The principles of Corporate Governance which are usually issued in the form of Codes, are a set of guidelines which essentially direct the activities and ethics of a company. These principles, although made in the form of recommendations, are generally not enforceable against the companies, are enacted primarily to guide their activities. The purpose of corporate governance principles is to guide the activities of the Board of Directors, their Committees and the Management of a company, which emphasises the need for the Company Secretary as the ‘governance officer’ to ensure adequate understanding and full adherence to these principles by the company. This paper seeks to highlight the concept of Corporate Governance and the role of the Company Secretary in promoting good Corporate Governance.
The Concept Of Corporate Governance
The basic principle of corporate governance is hinged on ensuring that those in the management of companies are responsible, accountable and sensitive to the needs and interests of the shareholders and creditors as well as paying requisite attention to their needs and interests in the business. The concept of corporate governance is complex but the principles on which it is based are straight-forward. These principles such as transparency, accountability, integrity, fairness and responsibility are universal in their application. The implementation of the principles in a company are to an extent, the responsibility of the principal officers of the company. In order to guarantee a successful corporate administration, it is imperative to ensure that the essential principles of corporate governance are adhered to by the company. Compliance should embody the observance of ethics, statutory provisions, and codes of corporate governance.
Corporate governance is concerned with maintaining the balance between the economic interests of the company and social goals. The governance framework is made to encourage the efficient use of a Company’s resources and equally to promote accountability for the stewardship of the resources. The objective of the principles of Corporate Governance is to align as much as possible the interest of individuals, corporations, and society. The adherence to the principle serves as an incentive to corporations, shareholders and those in Management; as adoption and promotion of these principles will help them to achieve their corporate aims and attract foreign investors to the Companies. This will also strengthen the economy of the company whilst eliminating the chances of any fraudulent activities and mismanagement.
The Organisation for Economic Co-operation and Development (OECD) defines corporate governance as involving a “set of relationship between a Company’s Management, its board, its shareholders, and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. According to the World Bank, Corporate governance is blend of law, regulation and appropriate voluntary private-sector practices which enable the corporation to attract financial and human capital, perform efficiently, and perpetuate itself by generating long term economic value for its shareholders while respecting the interests of stakeholders and society as a whole. At the wake of the emergence of the principle of Corporate governance in the early ‘90s, it was popularly understood as the system by which companies were to be directed and controlled.
Many countries, through their corporate networks and regulatory regimes embraced these principles and standards and accordingly, began to respond to the need to develop good governance processes by developing Codes of Best Practices on Corporate Governance for the guidance of their corporate sectors. In Nigeria, the principle of Corporate Governance has been accepted and this is evidenced by the influx of many Codes of Corporate Governance in Nigeria. Over the last decade, there has been about five different sector-specific Codes of Corporate Governance in Nigeria this includes; Code of Corporate Governance for the Telecommunication Industry 2016, issued by the Nigerian Communications Commission; Code of Corporate Governance for Banks and Discount Houses in Nigeria 2014 issued by the Central Bank of Nigeria; Code of Corporate Governance for Public Companies in Nigeria 2011 issued by the Securities and Exchange Commission; Code of Good Corporate Governance for Insurance Industry in Nigeria 2009 issued by the National Insurance Commission; and Code of Corporate Governance for Licensed Pension Fund Operators 2008 issued by the National Pension Commission.
Recently, in 2018, The Nigerian Code of Corporate Governance 2018 was issued to effectively institutionalise Corporate Governance best practices in Nigerian companies. The 2018 Code essentially aimed to promote public awareness of essential corporate values and ethical practices that will enhance the integrity of the business environment. By institutionalising the corporate governance standards, the Code has effectively rebuilt public trust and confidence in the activities of companies as well as guaranteed the fair and transparent trade and investment. It also emphasies on the need for companies to set up effective boards and competent Management which will act with utmost integrity as well as engage with shareholders and other stakeholders properly.
The Company Secretary
The word derives from the Latin “secretaries”, meaning a confidential officer, connected in turn with “secretum”, which means secret. Black’s Law Dictionary defined a Company Secretary as an officer charged with the direction and management of that part of the business of the company concerned with keeping records, official correspondence, giving notices, countersigning documents etc. This officer holds the ostensible authority to carry out certain legal and administerial duties and may also make binding representations for the company.
Over the years, there had been a misapprehension of the concept of a “secretary” as same has been equated to the position of a clerk. In the eighteen century, it was said thata secretary is a mere servant; who runs errands for a Company and nothing more. It was believed that Secretaries are not liable to the company for their actions and thus, were not regarded as an officer of the company. However, the position of the Company Secretary has undergone a lot of changes and had been endorsed by both judicial decisions and Statutes. A Secretary is no longer regarded as a mere clerk. He/ she now makes valid representations on behalf of the company and is actively involved in the managerial activities of the company. The UK Court in affirming the above, held that company secretary is a much more important person now than he was in the eighteen Century/
Recently, the narrative has somehow changed, and the position of a Company Secretary is now regarded as that held by an officer of the company and it has been made mandatory for Companies to have Secretaries. Accordingly, section 293 (1) of the CAMA provides that every company shall have a Company Secretary. The Corporate Affairs Commission (CAC); the body ceased with the responsibility of enforcing the provisions of CAMA, by its public notice ofJanuary 27, 2011 called on all companies to appoint Company Secretaries and duly file the requisite CAC form with the Commission to avoid penalty. Therefore, the position of the Company Secretary is mandatory for proper compliance under CAMA.
Duties Of A Company Secretary
The Company Secretary plays a significant role in company administration and performs a three-fold function as a statutory officer, coordinator, and an administrator of a Company. The Secretary is liable to both the company as well as the shareholders, creditors, employees, consumers, society, regulatory, and the Government. As one of the principal officers of the company, the Secretary has a duty to ensure that the company’s activities comply with the law regulating the company’s activities.
For instance, a Company Secretary in Nigeria must ensure that the provision of (CAMA) and other laws regulating the companies’s activities are adhered toAdditionally, the Secretary must ensure a timeous implementation of the Directors/ Management decisions. It is the primary duty to perform the basic secretarial functions which include issuing notices of meetings, preparing agenda for the meeting, convening and conducting the meeting as well preparing the minutes of meetings of Board of Directors, Shareholders, Annual General Meetings and any other meetings involving the company.
Under CAMA, section 298 highlighted the duties of the Company Secretary as follows:
- Attending the meetings of the company, Board of Directors and its Committees, rendering all necessary secretarial services in respect of the meeting and advising on compliance by the meetings with applicable rules and regulations;
- Maintaining the registers and other records required to be maintained by the company under this Act;
- Rendering proper returns and giving notification to the Commission required under this Act; and
- ministrative and other secretarial duties as directed by the directors, or the company.
Role Of A Secretary In Promoting Good Corporate Governance
One key function of a Company Secretary is taking proactive steps in ensuring compliance with applicable rules and regulations guiding corporate practice. This entails certifying that the principles of corporate governance as preserved in relevant codes are complied with by the Board and Management. According to the Cadbury Report that the company secretary “has a key role to play in ensuring that board procedures are both followed and regularly reviewed.” Emphasis is laid on the fact that the Chairman of the Board mostly relies on the company secretary for guidance on his responsibilities under relevant laws governing the business world. Over the years, prevalent practice has shown that the functions of a company secretary include but not limited to; ensuring that good corporate governance principles are upheld by the company. It, therefore, behoves on the Company Secretary to ensure that good corporate governance practice is enshrined. Where this is achieved, it makes liaising with the regulators easier and cordial.
The Company Secretary is often referred to as the Chief Governance Officer/ Legal Officer of a company, and this emphasises on its role in promoting compliance with corporate governance practices. By the principles of the Nigeria Code of Corporate Governance 2018, particularly principle 8, the duties of a secretary in promoting the corporate governance principle is highlighted. The introductory provision of Principle 8 provides as follows:
The Company Secretary plays an important role in supporting the effectiveness of the Board by assisting the Board and Management to develop good corporate governance practices and culture within the company
The Company Secretary plays an important role in supporting the effectiveness of the Board by assisting the Board and Management to develop good corporate governance practices and culture within the company
- Without prejudice to the provisions of extant laws, the Company Secretary should be a person with relevant qualifications and competence necessary to effectively discharge the duties of his office. The Board should ensure that the person appointed has the gravitas and objectivity to provide independent guidance and support at the highest level of decision-making in the company.
- Where the Company Secretary is an employee of the company, he should be a member of senior management and should be appointed through a rigorous selection process similar to that of new Directors.
- The Company Secretary should be adequately empowered by the Board to discharge his duties and responsibilities.
- The Company Secretary should have both functional and administrative responsibilities. The functional responsibility is to the Board through the Chairman, while administratively, he reports to the MD/CEO.
- The Board should approve the performance evaluation of the Company Secretary.
- Provide the Board and Directors individually, with detailed guidance as to how their responsibilities should be properly discharged in the best interest of the company;
- Coordinate the induction and training of new Directors.
- Assist the Chairman and MD/CEO in coordinating activities regarding the annual Board plan and with the administration of other strategic issues at the Board level;
- Notify Board members of upcoming meetings of the Board and its committees as well as other matters that warrant their attention;
- Compile Board papers and ensure that the Board’s discussions and decisions are clearly and properly recorded and communicated to relevant persons in a timely manner;
- Provide a central source of guidance and advice to the Board and the Company on matters of ethics, conflict of interest, and good corporate governance.In addition to his statutory functions, the Company Secretary should carry out the following duties and responsibilities:
With the increasing rate of Boardroom dynamics, management of Companies are realising the need for company secretaries to provide this expertise, specialised skills and technical knowledge in the area of advising and guiding the Board to ensure full compliance with the law. Some of the key roles played by the Company Secretary include;
Secretarial Role
The company secretary plays an important role in good governance by assisting the Board of Directors and its committees in effectively carrying out their duties. This is achieved by scheduling the requisite meetings for the Board and the Company generally and also preparing the agenda and sending out the due notice for the meetings. The Secretary also has a role to play in ensuring that the meetings are held and also take measures to ensure compliance with the resolutions, actions points and report on matters arising.
Organisational Role
The position of the company secretary avails them the opportunity of having a holistic view of the governance framework, thus, it is the generally responsibility of a Company Secretary to ensure that the frameworks and any supporting policies and procedures are clearly documented for ease of reference by the management. This is in line with the duty to ensure proper documentation under the Code of Corporate Governance.
Advisory Role
One of the salient duties of a Company Secretary has a duty to advise the Board of Directors, through the Chairman of the Board, on all corporate governance and compliance matters. Accordingly, the Secretary is expected to review the Board and the company’s activities periodically to ensure minimum compliance with the best practices as well as advise on necessary improvements that would strengthen the overall governance of the company. The relationship between the Company Secretary and the Chairman is paramount for an effective and efficient Board
Compliant Officer’s Role
The Company Secretary in playing its role in promoting the Corporate Governance principles act as a compliance officer: To ensure proper compliance with all relevant statutory and regulatory requirements. This is done by ensuring that the requisite filings as required by regulatory agencies are properly filed within the stipulated time.
Board of Directors Development
The company secretary plays a role in facilitating the development of the Board. This is achieved by assisting the Chairman in ensuring that the development processes which includes board evaluation, training, and induction is adopted. It also involves implementing a rigorous annual Board, committee and individual director assessment. In addition, the Company Secretary should advise the Chairman on the integration plans or strategies for new directors and training plan for individual directors. The company secretary is required to have a good working relationship with all board members to enable him/ her to effectively advise the Board to ensure that they act in the best interests of the company.
Liaising between the Management and stakeholders
The company secretary plays a significant role in interfacing between the management of a Company and the stakeholders. Through effective communication with the stakeholders, the Company Secretary ensures that the management understands the needs of the stakeholders and vice versa thereby promoting effecting running of the company. The company secretary should work closely with the Chairman and the Board to ensure that effective shareholder relations are maintained.
Disclosure and reporting
In recent years there has been increased emphasis in the quality of corporate governance reporting and calls for increased transparency. The company secretary usually has responsibility for drafting the governance section of the company’s annual report and ensuring that all reports are made available to shareholders according to the relevant regulatory or listing requirements.
Conclusion
From the foregoing, the role of the Company Secretary in promoting Corporate governance cannot be overemphasised as it is germane to the effective administration of a Company. The Company Secretary is the livewire of the company and must ensure that the Corporate Governance Principles are adequately complied with in order to foster good relationships amongst the company and regulators, shareholders, and stakeholders. Lastly, there is a need for the full cooperation of the management of a Company to enable the Secretary to seamlessly and effectively carried out its duties.