14 May The Role of Company Secretary is Underrated
by Matodzi Ratshimbilani
In the face of widespread malfeasance, barefaced disregard of the law governing both private and state-owned companies, the debate on the role and liabilities of directors has dominated public discourse in the recent past. The focus on the role of directors is justified given that they are tasked with the responsibility to direct and manage the affairs of the companies on whose boards they serve.
The role of company secretaries in the case of companies or board secretaries in the case of other legal entities not incorporated in terms of the Companies Act, has received less attention notwithstanding the fact that the role of the company secretary if performed as contemplated in the Companies Act and the law of corporate governance is a significant one.
It appears that in most cases company secretaries are reduced to minute takers and record keepers of the board. This is an important role of a company secretary in terms of the law however it is a secondary role when compared to the principal role of a company secretary which in terms of section 88 of the Companies Act is to provide directors of the company with guidance as to their duties, responsibilities and powers, most importantly the role of the company secretary in terms of section 88(2)(b) is making aware the directors of the company of any relevant law that affects the company and their responsibilities.
The role of the company secretary in guiding the directors of their duties and advising them on the applicable legal regime if correctly performed should serve as a last line of defence to prevent the directors from breaking the law and acting against the best interests of the company. The company secretary is part of the board and all decisions made by the board are so made in the presence of the company secretary. Even to the extent where decisions are made without physical meetings the company secretary is responsible for recording all decisions of the board before they are executed. This affords the company secretary an opportunity to sternly counsel directors from breaking the law.
In most organisations this important role of the company secretary has been reduced to basic administration. Further, there are many company secretaries that are under qualified and do not have the requisite knowledge and experience to serve as authoritative advisers to directors who act outside of their mandate and the law.
Where a company secretary is inexperienced and lacks gravitas it is often the case that far from providing guidance to the directors, their role is so diminished that they are unable to meaningfully engage the directors of the company let alone provide them guidance and give them legal advice.
The nomenclature of secretary for this role seems to worsen the position. Many an inexperienced director on hearing that the designation of what is essentially a legal advisor of the directors often adopts the attitude that the company secretary is a junior employee of the company for whom no high regard or attention should be given. This is indeed a grave error as the Companies Act and the law in general expects the so-called company secretary to act as the most senior legal counsel in the company and is expected to give legal advice and corporate governance guidance at the apex of the leadership of the company, being the directors.
Before the advent of the 2008 Companies Act, the audit committee of a company was treated in the same manner as any committee of the board which only executed its responsibilities at the behest of the board of directors and without inherent decision-making powers. In line with international practice the 2008 Companies Act enhanced the role and standing of the audit committee by creating it as a statutory committee which is answerable to the shareholders and not the directors for whom it is intended to serve as a watch-dog. There is a lesson to be learnt from the manner in which the 2008 Companies Act treats audit committees which can be applied to the role of company secretaries. Given the importance of the role that company secretaries are expected to play in relation to the conduct of directors it seems that the structural repositioning of company secretaries is long overdue. The position of company secretary should be placed independent from the board in the same manner as the audit committee to ensure that it assumes the powers and the independence concomitant with its legal responsibilities. This reclassification of the role of a company secretary can be done in a similar manner as the auditing profession has done with respect to the role of internal auditors and the elevation of chief audit executives in many companies.
An experienced company secretary who is appropriately placed in the structure of the company, with the necessary authority to call directors to order will go a long way to call out directors when they disregard their fiduciary responsibilities, the law, company policies and protocols.
Director: TGR Attorneys