Gatekeeper or minute-keeper? The company secretarial role is what you make of it
The expectations of the company secretarial role are higher now than they have ever been, but are company secretaries ready to take up the challenge? CSj talks to Ben Mathews, FCIS, Company Secretary and Global Head of Secretarial Services, Rio Tinto, about how to get the most out of your career.
Thanks very much for giving us this interview, can we start with some background about yourself?
I graduated in European politics, history, geography and languages, so it was not a vocational degree in any sense of
the word. When I left university I joined Price Waterhouse, as it was then, and spent four years with them during which time I qualified as a Chartered Secretary and worked in a range of areas across the firm, seeing companies at all stages of their lifecycle – from birth to grave!’
Did you take the Chartered Secretary exams as a part-time study?
‘Yes. I took the exams over a two-year period as a post-graduate sponsored by Price Waterhouse. That’s one of the great things about working for a larger firm – they invest in their most important assets – their people – and are therefore perhaps better than some in supporting training and development. It was a great place to start in the company secretarial world and I feel incredibly fortunate to have had that very strong, technical start in the professional services world.
I was seconded to a few clients during my time with Price Waterhouse and went on an extended placement with a large, FTSE-listed hotel and catering group called Forte in London. After seeing through a hostile and ultimately unsuccessful bid defence, I moved on for a few years to the conglomerate BAT Industries which then became British American Tobacco. These roles gave me a good general exposure to the core company secretary responsibilities.
I eventually moved to BG Group, the upstream oil and gas business of the privatised British Gas monolith created under the privatisation era of Margaret Thatcher. This provided me with an incredible exposure into the natural resources sector. I joined as Deputy Company Secretary and very shortly after that was lucky enough to be offered the opportunity to become the Company Secretary. I stayed with them for about six years before moving to Rio Tinto the Anglo-Australian miner, where I am now.’
Interesting to see that you did an arts degree before moving into the company secretary field – do you think it’s a good thing have a varied background before specialising in this area?
‘I think you’re spot on there. The fact of the matter is that I was never attracted to the idea of doing a vocational degree and was able to make a move into business by pursuing an area of interest to me that developed during my period at University. I was lucky enough to have been able to do many varied and exciting things leading up to and during my time at University which I probably wouldn’t have done if I had gone down the vocational path earlier. I think there is a richness of experience of different cultures that I was able to take advantage of and exploit in my roles when I started working and that I’m still able to exploit today.
It certainly helps to have a cultural and behavioural sensitivity in this role. There is a requirement for diplomacy and tact within a formal board environment. You need to recognise different and sometimes difficult and complex behaviours and weave them together to get the best possible outcome from the diverse range of skills and experience available around the boardroom table. Working with your chair to that effect is obviously important. I personally feel that some of the experience I’ve had outside of the corporate sector brings an emotional maturity and a regard and recognition for some of the challenges that boards today are facing.’
Can we turn to board effectiveness. I believe you were a member of the ICSA’s Board Effectiveness Steering Group which helped draft the UK’s ‘Guidance on Board Effectiveness’ (see ‘Higgs revisited’ on page 29). Are there lessons Hong Kong can learn from that exercise?
‘What this area hinges on is making sure that directors have everything they need in order to come to effective decisions. That means making sure all of the infrastructure is in place and making sure that the directors have the right information – what you as the company secretary believe to be the right information – and in a balanced and digestible form. This is where things like the agenda for a meeting, whether it is a board or board committee meeting, is so critical as it leads to decisions being taken which, at the end of the day, could have long-lasting consequences for the company and its owners.
You also need to make sure you’re giving enough time for discussion and dialogue – not too much, not too little. So you need to work through all of this with the chairman, chief executive and other members of the management team – what is required both from a time allocation perspective, but also in terms of the content of board papers and the inputs from the management team. It’s all about managing and therefore balancing expectations. My job is to be the interface on the one side with the chairman and non-executives and on the other side with the management team to make sure that’s all in place.
The revised guidance on the role and responsibilities of directors that I worked on with the ICSA in the UK was really interesting because that covered the roles that should be played by the chairman, the senior independent director, the independent non- executive directors, the executive directors and… guess what, the role of the company secretary. To judge by the number of copies of the guidance that have been accessed through one means or another, it appears to have been quite widely used and cascaded. I have certainly been embedding it into the processes that we have at the office, having spent quite a lot of time in dialogue with my own chairman to solicit his feedback and indeed other members of my board, so that actually has proved to be quite productive.’
What would you say are the most critical things for board effectiveness?
‘You have got to get the information flows right. By which I mean you have to make sure that you provide, in particular to the non- executive directors, meaningful, concise and clear information at the right time, making it unambiguously clear what it is that you are seeking by way of decision, if indeed a decision is being sought at all. That may seem to be a very trite and easy thing to say, but to get it right every time is actually a much bigger task than you might believe. To company secretaries it is teaching your grandmother how to suck eggs because that’s our bread and butter, that’s what we do, but the expectations of management and the board about a discussion topic are not always aligned.’
You made some interesting points in your presentation at the Institute’s Corporate Governance Conference 2012 about the expanding possibilities of the role of the company secretary – in particular the opportunity for company secretaries to think strategically for the board.
‘Yes. I think there is a need to anticipate a problem before it becomes a problem – time and again you need to see the car coming around the corner before it hits the buffers! It’s keeping things in control and being in a position to advise and do something about it. Making connections between the various side comments that you receive from fellow directors and others within the management team is interesting and not without
its own challenges. And bear in mind that problems, howsoever insignificant they may seem can quickly go “viral” in this social media world. So you have to be spinning all of those plates very fast, you’re always under that scrutiny and expectations are much, much higher than before. The challenge facing the professional Chartered Secretary is one of being in a position to step up to the plate and keep ahead of the game. That’s more easily said than done of course.’
Accountants have been very effective in promoting international financial reporting standards, do you think company secretaries should be promoting international corporate governance standards?
‘I think that’s incredibly difficult. It is much easier in my view to establish a standard basis for international financial reporting (assuming national regulators can agree!) because at the end of day the financial statements can only ever be just that – it’s either 1 or 0 if you see what I mean. When you are talking about corporate governance standards, it’s so much more difficult because this is necessarily a qualitative, principles-based assessment that is made. There are principles which perhaps have a potential to be applied globally. You might be able to apply the principles of the UK corporate governance code, for the sake of argument, or the Hong Kong equivalent, globally but not the detailed provisions – they don’t respect jurisdictional differences, they don’t respect different cultures or expectations.
Also, I have to ask myself the question, is it helpful to be able to point to the application of a detailed corporate governance provision when you are reporting to your shareholders? What do they get from it? Comfort that your company is operating in a form that is consistent with those detailed provisions? There may be some merit in that externally, but I wonder whether the reality of it is more complex. When you think about that actually happening in practice, the international corporate governance standards would have to be at such a high level as to actually raise questions about whether they are going to be of any use or comfort to stakeholders.’
Since the global financial crisis concern has been raised about the effectiveness of the comply or explain approach adopted in the UK and Hong Kong. What are your views?
‘I have no bias at all but all I would observe is that there is a great deal of respect that exists, I think for good reasons, for a principles- based reporting regime which gives individual companies flexibility in the way in which they apply those principles – so long as investors and other stakeholders are happy to accept variations in their implementation, which isn’t always the case.’
Yes, that seems to be an issue here, the stock exchange has received feedback suggesting that companies are reluctant to take the ‘explain’ route fearing that shareholders will see any deviation from the provisions of the Corporate Governance Code as bad governance.
‘Yes, that’s the ‘comply or disdain’ problem! But, seriously, there is an initiative that is brewing in the EU at the moment to take a swipe at the principles-based comply or explain regime in the UK by putting in place a legislative requirement that EU member states would have to adopt and report against. I think that just removes from companies the highly-respected flexibility that is currently afforded to them under the current arrangements.
You can read different things into the rationale for the move, but some have been arguing that the global financial crisis was the result of a failure of our corporate governance model. Is the corporate governance regime in the UK fundamentally broken? That is a big statement. The prime minister in the UK at the time of the global financial crisis, Gordon Brown, basically said just that. But David Walker [author of the 2009 Walker Review] believes it was not a failure of corporate governance but was fundamentally about behaviours. The revisions made to the UK’s Corporate Governance Code were in response to David Walker’s report, including the request that directors should have available to them refreshed guidance on how to approach particular issues and on how to facilitate effective decision making around the boardroom table. Of course, that will never prevent another crisis. No form of legislation or corporate governance guideline will prevent another global financial crisis, you can never legislate for a solution, but the focus has shifted to the behavioural challenges.’
Do you think behavioural governance will become a more important issue in the future?
‘Yes, I think it will. The expectations for directors are so much greater today amongst stakeholders, whether it’s employees, shareholders or governments, directors are much more under scrutiny than they ever have been. I don’t think that’s a bad thing, they’re having to take their responsibilities much more seriously than they have before.’
What does the future hold for you personally and do you have any advice for young entrants into the Chartered Secretarial profession?
‘It continues to be a fascinating world to work in as a company secretary, not least in this particular sector. My role continues to present new challenges and stretches me in ways that I had never xpected to be stretched when I started out in this career and that’s part of the excitement, part of the challenge. I like that.
My advice to anybody that is coming up through the profession would be to never underestimate the scale of the challenge that is facing a company when it is trying to achieve the delivery of its strategy, and never underestimate the role that you as a Chartered Secretary can play in supporting and facilitating that. Given the heightened regulatory environment and the scrutiny that boards are under these days, there is a fantastic opportunity for company secretaries. I think the company secretary needs to step up to the plate and be an even more proactive player than perhaps has been the case in the past. That is not least by virtue of the fact that the environment is so much more challenging than it has ever been before, but I think there is a great opportunity to drive the agenda, to get yourself heard around the boardroom table. If you’ve got something to say, don’t “shout it from the bottom of a well” as the saying goes – don’t underestimate the contribution that you can make.’
Do you think the corporate governance advisory aspect of the role will come to dominate in the future? In the US many corporate secretaries are now their companies’ designated ‘Chief Governance Officers’.
‘I think being the company’s ‘Chief Governance Officer’ or ‘CGO’, is but one component of the role. This makes it a very big role because there is an expectation on the part of chairmen and boards that you are the company secretary, the CGO and whatever else they might want you to be. In all seriousness, I think that the role continues to broaden in scope and keeping all those plates spinning at the same time is not easy.
We haven’t talked, by the way, about the reporting lines of the company secretary and this is something I have an interest in. I report to my non-executive chairman and I think that approach is fine – it is transparent from a shareholder perspective. Of course, there isn’t a single solution for every company in the same way that there isn’t a golden ticket for corporate governance that can be applied across the world.’
Do you think that reporting to a non-executive chairman is preferable to reporting to a CEO?
‘I don’t think there is any right way to work the reporting line, other than to say that my experience has been that working directly to a non-executive chairman perhaps reinforces the independence and “line of sight” that the company secretary provides. Of course, there will be many companies that can’t afford the expense associated with a resource that is purely reporting into the non-executive chairman. They need to be able to use the skill set that the company secretary brings in other areas, whether supporting the CEO or CFO in their work.
Some might say that having a completely independent company secretary might be a good thing. Perhaps, although this is a rather radical suggestion, company secretaries should not be employees of the company, perhaps they should be engaged under some kind of fee-based arrangement that preserves their independence. That would reinforce the trust amongst the non-executive component of the board, as well as other stakeholders, NGOs in our case, and shareholders obviously. It’s a thought.’
You report to the non-executive chairman, but presumably you still work closely with the CEO and management?
‘Of course. The beauty of the typical arrangement is that you are nicely juxtaposed between the two. Some might say you neither love them nor hate them and you are neither loved nor hated. The simplicity of the current arrangement is that it allows you to dip in and dip out. And there are still ways in which you can reinforce the independence of the company secretary, for example in the way in which he or she is assessed, appointed and removed.’
Ben Mathews was interviewed at the Institute’s Corporate Governance Conference 2012, held on 5–6 October in the JW Marriott Hotel, Hong Kong. He was a speaker and panellist in session two of the conference.
SIDEBAR: Higgs revisited
The UK’s Financial Reporting Council (FRC) has published a number of guidelines designed to help companies implement the UK’s Corporate Governance Code. Among them is the 2003 guidance based on the Derek Higgs report on the role and effectiveness of non-executive directors. In 2009, the Institute of Chartered Secretaries and Administrators (ICSA) in the UK was commissioned by the FRC to revise the Higgs guidance and it set up a Board Effectiveness Steering Group to carry out the work. Ben Mathews was a member of the Steering Group and helped draft the summation of their work – the Guidance on Board Effectiveness, which was published in 2011.