In the second Q&A of our series, The Conference Board's Doug Chia explains how emerging areas of board oversight are impacting the corporate secretary's role. You can read the first here.
Since your time at J&J, how have you seen the role of the corporate secretary evolve?Doug Chia: The demands of the job of the corporate secretary continue to increase, primarily due to (1) the demand for engagement with institutional investors; (2) the emphasis on corporate sustainability; and (3) expectations for board oversight of new issues, such as cybersecurity, human capital and culture. What people don't realize is each of these items requires the corporate secretary to spend significant additional time in meetings with internal and external stakeholders, dealing with internal emails, and drafting or reviewing external disclosures. This is on top of what they are already responsible for, which includes board and board committee meetings, the annual meeting, SEC reporting and legal entity management. I don't hear about many corporate secretaries being given additional resources to do all of these things up to the standards they would like, so it becomes triage.
As investors sharpen their focus on various aspects of board oversight (e.g., ESG, corporate culture, cybersecurity, diversity), what key challenges and opportunities do you think this poses for corporate secretaries?DC: Many of these are issues the board has never been expected to focus on as much as they are today. Take cybersecurity as an example. First of all, it's a relatively new thing for corporations. For the board, it used to be part of the corporate IT and general security reviews, which probably didn't take place more than once every year by the audit committee. It now requires regular reports from the CISO at the committee and board levels, and some are calling for boards to bring on cyber experts and even create dedicated cybersecurity committees. Corporate culture, which includes the types of employee behavioral issues brought to the forefront by the #MeToo movement, requires the board to examine employee actions deeper in the organization in a way that goes beyond reviewing the results of broad employee engagement surveys. These challenges create opportunities for corporate secretaries to interact with and understand more areas of their companies and maybe take on more responsibilities, like corporate sustainability. All this could be good grooming for positions higher up in the organization, like the chief legal officer.
According to the 2017 Spencer Stuart Board Index, there's been a recent influx of first-time directors into the boardroom. What's the corporate secretary's role in onboarding these new directors, particularly when it's their first board seat?DC: Onboarding new directors requires a lot of work if you want to do it the right way. When a new director is also a first-timer to the world of public company boards, it requires more work today than just sending them the standard memo on legal fiduciary duties and liability under the securities laws; first-time directors have to understand the increased expectations on board members in the eyes of regulators, shareholders and employees. This should also make finding opportunities for outside director education more of a priority. All of this falls on the shoulders of the corporate secretary.
Many recent corporate crises in today's news cycle can be tied back to flaws in corporate culture. What do you believe is the board's role in monitoring (and even influencing) company culture?DC: This is a tricky one since even full-time employees have to spend a good chunk of time (sometimes years) working for a company before they really understand the corporate culture. People like to say that directors should spend time walking through the offices and facilities and talking to rank-and-file employees, but that has limitations. Metrics to measure corporate culture are squishy, but directors should be asking for data on employee behavior, like HR-related incidents, accounting improprieties, and thefts and defalcations, as well as employee incentive systems and diversity and inclusion. Also, reviewing whistleblower complaints can be very revealing. A lot of this is 'dirty laundry' that senior management will want to scrub, spin, or explain away, so directors need to be able to make sure they get full disclosure and see through the filters.
What's the future of the corporate secretary role? (i.e., What will a corporate secretary be doing in 5 or 10 years?)DC: The work of the public company corporate secretary can typically be put into three buckets: board work, SEC disclosure, and subsidiary management. Today, most of the corporate secretary's attention is on the board work. I expect board work to increase to the point where it's almost all of what the corporate secretary has the capacity to focus on. Part of this is because anything that relates to the board is a priority for the CEO, so it's automatically the top priority for the corporate secretary. The time required on SEC disclosure will also increase because of demands for additional proxy disclosures and disclosure of non-financial metrics (i.e., sustainability disclosures). Increasingly adding to someone's workload will eventually require some things to be deprioritized or offloaded, maybe even outsourced. This introduces more internal and external resources to manage. Boards are also likely to retain more outside experts. Some see future boards using independent staff to help with monitoring and compiling more information from outside sources. Just like the past 15 years, the next 5 to 10 will be an exciting time to be a corporate governance professional, but it will also be incredibly demanding.
Don't forget to check out Doug's episode of Inside America's Boardroom to learn more about the corporate secretary and board of directors relationship.