The first article is based on an interview where two corporate secretaries discuss different matters. One acts as an employee that works for a large organisation and the other is an external service provider dealing with a portfolio of clients.
Pierre Schaubroeck, obtained his LLM (1977) and LLM in European Law (1979) degrees from Ghent University. He joined the Bekaert Group as a company lawyer in late 1979 and served as Group General Counsel (Head of Legal) from 1999 thru 2014, and as Company Secretary from 2006 thru 2014. As General Counsel, he managed a team of 10 company lawyers in Belgium and China who were in charge of the legal support to Bekaert’s global operations. He was a member of the Board of the Belgian Institute of Company Lawyers from 2004 thru 2006 and from 2008 thru 2009, and was the Institute’s Chairman from 2010 thru 2012. From 2015 thru 2017 he was the Chairman of bMediation, a Belgian non-profit organization promoting mediation as an effective dispute resolution method and offering training programs in civil and commercial mediation.
Raphael Docquier has 20 years experience as an economist and chartered accountant. He is currently Director at PwC Luxembourg in charge of the EGC (Entity Governance and Compliance), focusing on corporate secretarial issues. He has participated in commissions for Ordre des Experts Comptables à Luxembourg related to Anti Money Laundering, domiciliation and ethics. He graduated from HEC Liège in Corporate Governance. He is acting as corporate secretary for several entities and international groups, and he is member of ILA working committee “Company Secretarial and Governance Officer Committee”.
Speaker: The corporate secretary function is largely unknown by the public. The first question would therefore be, What is a corporate secretary ?
Pierre: A Corporate Secretary is usually appointed by the Board of Directors to serve as the organiser and record-keeper of Board and Shareholder meetings. That is the person’s role in the traditional, narrow sense: a glorified clerk in a purely administrative position. But that rather unexciting role has expanded to include various aspects of corporate governance, especially in listed companies. As the very term implies (“secret”), confidentiality is central to the job.
Raphael: A corporate secretary is an officer of the company, generally appointed by the board in order to facilitate its work. Their first role is to support the board (and related committees) processes. They ensure an accurate follow-up of the governance of the company. The role is wide and, as a facilitator and coordinator, a corporate secretary must be able to understand many matters around tax, accounting and company law, to effectively bring added value. One key rule: they can never take part in the debates; just enable their efficiency.
Speaker: In practice, are organisations appointing a corporate secretary ?
Raphael: In Luxembourg, the corporate law does not refer directly to this role. There is no obligation to appoint an official corporate secretary, neither legal definition of the role. Officially, the corporate secretary is recommended for governance purposes (see recommendation 2.6 in the “Ten Principles of Corporate Governance” of LuxSE). Most of the articles of associations nevertheless mention the possibility for the board to appoint one secretary, director or not. As a consequence, a corporate secretary is rarely officially appointed. Some references, e.g. for regulated funds, are made in the prospectus generally because investors may be US-based or UK-based entities where the practice of appointing a corporate secretary is common. Generally, corporate secretaries exercise their role through a service agreement when they are external to the organisation while they are discrete actors when they are part of it. The conception of the corporate secretary, to be transparent, remained essentially a delegation of administrative tasks. The need for a guardian of the governance, as mentioned by Pierre, is growing with the current regulatory pressure and increasing society expectations.
Pierre: In Belgium, likewise, the Companies Code does not mention the Corporate Secretary. But the Corporate Governance Code for listed companies does provide that the Board should appoint a Corporate Secretary, who should have “the necessary skills and knowledge of corporate governance matters”, and who should be in charge of preparing the company’s corporate governance documents. Most if not all listed Belgian companies have appointed a Corporate Secretary who, by way of a rule, is a senior employee of the company. By means of both, position and network, the secretary should be able to function as a key good governance agent of the organisation. According to the Corporate Governance Code for non-listed companies, the appointment of a Secretary is advisable in larger companies. As I have always worked for a listed company, I will comment on that category only.
Speaker : You mentioned that the role is changing but, why a corporate secretary in a company?
Raphael : We could try to summarise this under three axes. The first one is “support” i.e. the administrative support needed (convening, logistics, agenda, board packs) prior to any meeting. The second is “comfort”, namely, knowledge of the rules and the constraints (internal and external) to assist the board in the process. The third one is “projection” that has to do with documenting the debates and following up the actions to be undertaken. By combining these 3 axes, the Corporate Secretary gives substance to the board and contributes to the efficiency of the organisations.
Pierre: I agree with that. But in addition to this formal role, the circles frequented by the Corporate Secretary (shareholder meetings, board and board committee meetings, sometimes Exco) provide them with moral authority and with a quantity and quality of information that they may use—naturally subject to the confidentiality filter— throughout internal networks. Conversely, the corporate secretary will be able to act in the opposite direction by escalating issues arising at lower levels in the organisation. That is an important asset in their governance role.
Speaker : If we understand well, the corporate secretary is the main player of an organisation’s governance
Raphael : Governance is often a trap. In many situations, we refer to this concept to hide a lack of capacity to solve problems that require, for instance, timely coordination. We often hear “we should set up the right governance for this process” without actually finding a solution. In fact, there is some confusion among what governance, process and strategy are. Governance is the control of the behaviours and actions (efficiency-driven) to achieve the strategy; processes are sequences of actions to be followed; procedures are the agreed methods to perform processes. The conception of the strategy belongs to the board. The translation of the strategy into processes is the management’s responsibility who will set up the right procedures to be executed by the staff. These systems cannot work independently, that’s why the corporate secretary plays a major role as animator of a given governance system. As you can see the role is wider than a mere support to the legal function.
Pierre: I would say that the Corporate Secretary’s job linked to governance is helping to ensure that the company is doing things “right”. Good governance starts by complying with the existing rules, of which there are a great many. But "governing" according to the rules only (ticking all the right boxes) does not guarantee sound decision-making. Good governance is a question of corporate culture, mentality and behaviour.
Speaker: Do we see contradictory points of view on the role of the corporate secretary when performing as an “animator” or as a “controller” ?
Raphael: I do agree with Pierre regarding the complexity of governance. The role of the corporate secretary will be influenced by how corporate governance is conceived within the organisation. As a means of comparison, we could illustrate it with the snooker game. You can play traditional snooker (the red and coloured balls have to be put into the pots by respecting a sequence), or American snooker (with full and striped balls, and no order to put them into the posts except for the black one, that must remain until the end). Organisations can adopt a system of governance similar to the traditional snooker or to the American snooker. Therefore, the role of the corporate secretary will vary: animator versus controller, governance officer versus administrative agent.
Pierre: Like I have mentioned before, the secretary is in a position to act as one of the company’s main governance agents and to support the company in doing the right thing, whether as an “animator” or as “controller”, or anything in between. This will actually depend on the company’s organisation and on the level of authority that the board is willing to grant them on the subject of governance. Departments such as internal audit or compliance may also have a say on corporate governance. There is not a “one size fits all” answer to your question.
Speaker: The underlying question is what are the qualifications required to be a corporate secretary ?
Raphael: Some countries (common law jurisdictions) are differentiating corporate secretaries working on activities linked to the everyday life of the organisation, from the ones who are primarily dealing with legal matters. Corporate secretary must be an “all road” person, capable of understanding laws, business and tax matters, economics, to name a few. They should adapt themselves to their interlocutors and be the bridge between stakeholders.
The corporate secretary’s role is wide and current qualifications do not fully cover its requirements as it is midway between a lawyer and an economist. We have to underline the approach of ILA whose certification process for corporate secretaries already responds to the Luxembourg needs. While both a lawyer or an economist hold the right profiles to become efficient corporate secretaries, a lawyer’s profile, in my opinion, isn’t necessarily a must have in this area.
Pierre: The Corporate Secretary of a listed company should definitely be, in my opinion, a senior in-house lawyer with a long track record, extensive networks, good company’s know-how and advanced knowledge of the laws and regulations concerning listed companies. However, the person holding this position doesn't necessarily need to be the Head of Legal. I agree with Raphael on the risk of "over-lawyering" the corporate secretary's role, however, the in-house lawyer that I am describing is perfectly able to mitigate that risk. The laws and regulations applying to listed companies are numerous and complicated, and specific issues requiring immediate attention can and do arise in the middle of board meetings. As Belgian in-house lawyers are qualified to give privileged legal advice to their employer, the Corporate Secretary is in a position to do so during a board meeting if necessary. Having said all of this, the corporate secretary should be a seasoned in-house person even if he is not a lawyer.
Speaker: Insourcing or outsourcing the corporate secretary, what to bet on?
Raphael: I am an “outsourced” corporate secretary. The choice of clients is generally driven by two factors: resources and risk. Resources, because the organisation lacks a professional to face this increasing volume of work, and also it might be a lack of competencies as well. In the past it was possible to dedicate some administrative to this job but it has become more and more complex. more and more complex.
In large groups, we have a cohabitation between both approaches, notably due to the international context. For instance, PwC is hired in the jurisdictions where the central corporate secretary team is not comfortable and/or resources are not available.
Advantages of an outsourced professional corporate secretary are independence to the organisation (limits related to risk of collusion), expertise (professional trained for this purpose in an international environment), and experience (the advantage of facing different clients with different approaches). Confidentiality is covered by our engagement letters and is guaranteed. Nevertheless, being out of the company may reduce the interactivity with some levels of the organisation, and access to information, however, the digitalisation of our workplaces strongly reduces these limitations.
I would say that the decision of insourcing and outsourcing will be more a matter of corporate culture but in joint ventures, international or highly regulated sectors, an external corporate secretary would have my preference. Also, we see that in some smaller family companies an independent stakeholder could be a guarantor for peace.
Pierre: The outsourcing option advocated by Raphael is probably best suited for most Luxembourg companies. But that cannot be the solution for an operational industrial or financial listed company. No external person will ever have the company's understanding and the intimacy with it, the ins and outs that an internal person has. Confidentiality will be another issue.
Speaker: Do you think that a legislation around corporate secretary would be helpful for the future ?
Raphael: It is a two-level question. The first level is the insertion of a legal framework to the corporate secretary function as it exists for lawyers, independent auditors and chartered accountants. Due to the specificity of the profession, I would be in favour of having an organisation for corporate secretaries, and access to the profession based on objective criteria. It would reinforce the role and give a better image to the market. In addition to this, the insertion of the role in the commercial law would be interesting too, to frame legally the scope of a corporate secretary and gives them some possibility to act as per the law for specific actions (registrations, certifications). A legal definition would facilitate for sure the promotion of this role as it would directly demonstrate the utility of the function.
The second level relates to the obligation for companies to have a corporate secretary. The UK changed its position around this matter. In the past, the appointment of a corporate secretary was compulsory as per the regulation. This has currently become optional (except for quoted companies). I think that the freedom to choose is totally in line with the function. The appointment of a corporate secretary must not be an obligation but a need built on organisations' expectations for governance.
A corporate secretary is not part of the legal process, he or she is part of the governance. The code of governance relies on the “comply or explain principle”. Therefore, instead of being an obligation, it should remain a recommendation whose initial scope is in the law imposing a minimum qualification to ensure quality.
Pierre: I cannot speak for the outsourced Corporate Secretaries in Luxembourg. As for Belgium I personally do not feel the need for specific legislation. The Corporate Governance Codes and the companies’ Bylaws can provide sufficient guidance.
Raphael: Key element is that, whatever the form or the profile, an efficient corporate secretary makes the organisation more efficient, saving time and bringing security to business performance. It will be an ad hoc factor to reach success in the future.
Pierre: The Corporate Secretary holds a highly sensitive position in the company, and utmost attention should be given to the selection of the holder. All the same, the paucity of legislation on the subject offers flexibility in organising the job to fit a company’s requirements.