Company Gatekeeper

Monday, October 1, 2007 - 11:10

The company secretary is often seen as the key source of corporate knowledge in organisations. Australand's Bev Booker talks to Management Today about her role in ensuring good governance.

In an era where governance is high on the corporate agenda and transparency is a part of doing business, it is natural that the company secretary is viewed as adviser, mentor and arbiter of what is acceptable, and what is not.

Bev Booker, Company Secretary of Australand, one of Australia's major diversified property groups, has clear views on what is required in her role. And according to her, many businesspeople often don't fully understand what it actually is that a company secretary does.

"You act as an adviser to the board in a lot of respects," she explains, "but specifically in terms of the Corporations Act, the entity's constitution and, in the case of listed companies, the ASX Listing Rules and the equivalent of these in other jurisdictions; in Australand's case, the Singapore Listing Rules.

"Over and above that, you advise the board and individual directors on corporate governance-related matters, and at all times seek to ensure that there is an appropriate governance framework in place across the whole entity.

"On an ongoing basis, the company secretary is responsible for carrying out the instructions of the board, which involves assisting in the implementation of corporate strategies and giving practical effect to the board's decisions.

"You also have responsibility for communicating with the company's members and ensuring that all members have equal and timely access to material information concerning the company."

Booker believes that if a board is not operating effectively, it can, on occasion, be due to the company secretary not properly fulfilling his or her role.

"To do the job well, you have to be totally across the company's strategic and operational goals," she says. "You need to make sure that the board is getting the sort of information that it should be getting. What I'm talking about here is information that facilitates good decision making.

"It's a matter of ensuring that the company's strategy is being effectively executed by having the appropriate reporting mechanisms that allow the board to monitor management's performance against the company's key objectives.

"The company secretary would normally play a supportive role to the chief executive officer in making sure that such controls and processes were in place for this to happen."

Booker admits that the relationship between the chairman, directors, company secretary, chief executive officer and management can at times be complex.

"It could be the fact that the board isn't happy with a particular director, the CEO or one or more of the senior management team," Booker says. "Or It could be that senior management are deliberating on the most appropriate way to deliver certain specific information to the board. You are part of the senior management team, but it is also your responsibility to protect the interests of the directors.

"You need to be able to be totally discreet when the situation calls for it in terms of what you say and what you don't say.

"A company secretary is also a gatekeeper. Most companies have rules, written or otherwise, whereby 'official' information cannot go to the board without first going through the company secretary. This is a regular governance mechanism ensuring that all directors get the information that they are entitled to and that proper records are maintained of these important matters.

"There are a lot of things that you actually do that the board doesn't actually see, such as sending papers back to the originator because they don't meet what is required. By the time the board actually gets to see papers they're often in a better shape than they would have been otherwise."

Booker has fulfilled the role of company secretary in a number of companies across a range of industries and she has found that the role can vary quite significantly; for instance, the position can vary depending on the board's attitude, the managing director's attitude, and how they perceive the company secretary's role.

Asked for her own definition of good corporate governance, Booker admits she likes the definition that Chartered Secretaries Australia uses.

"CSA describes corporate governance as the process by which corporations are subjected to accountability mechanisms. It is concerned with the manner in which corporations are made accountable to and transparent in its dealings with all stakeholders, and focuses on the way in which the board ensures that the company is accountable to its owners.

"I think it is really that simple. It's all about making sure there are accountability mechanisms in place so that the company acts in the best interests of its shareholders."

Booker believes one of the main functions of the board is to provide strategic guidance and effective monitoring of management on behalf of the shareholders. The board should also, she says, make sure that there are proper processes and policies in place to ensure that the company is compliant with the relevant laws and regulations.

"A good board understands the role of the non-executive director and doesn't interfere in the management of the company," says Booker.

"A good board will add value to what management is trying to achieve, whether it be in formulating or executing company strategy or in developing policy. If the board has a good knowledge of the outside environment, and of the company, it can add that extra dimension to the goals that management is trying to achieve - without actually getting in and doing it themselves."

With her length of experience as a company secretary, Booker also believes that while it is important for boards to assess their performance it is not always done particularly well.

"It is a recommendation under the ASX guidelines, and the majority of listed companies undertake performance evaluation of the Board and directors in one way or another but, in my experience, it is not a totally effective process. It's an area that probably requires more focus."

And when it comes to what makes directors effective in their role, this company secretary also has some strong views.

"I think that, given the complexity of business today, directors need to be reasonably smart and intelligent people who have a high degree of common sense," explains Booker. "Directors need to have complete integrity and promote an open and transparent culture throughout the organisation.

"Obviously, having the right blend of skills on the board is critical, as is a good understanding of the business and the ability to challenge management in a positive and constructive way. Good directors also focus on the bigger picture and don't get bogged down in detail."

Booker says the role of the chairman requires skills in addition to those listed above. She believes that the leadership provided by the chairman is critical in creating an effective board culture that is based on respect, trust and candour, which, hopefully in turn will cascade down to the senior management team and then to the rest of the organisation.

When asked what role the company secretary plays in governance, she says that the role is evolving in line with increased regulatory scrutiny.

"These days, company secretaries are considered to be at the forefront of corporate governance. A good company secretary will ensure that appropriate delegations and accountability mechanisms are in place to protect the board and to make sure that the board is getting the information it should have in order to be able to monitor the company's performance effectively."

Booker says that effective governance is not just a matter of abiding by the "letter of the law" but is concerned with the behaviour of directors, managers and employees. "It's not an either/or; I think you need to have codes and regulations in place to set the minimum standard, but then even when these are in place, companies can be borderline in terms of compliance. So again, what distinguishes a good board and therefore a good company is its robust and effective social system, which encourages accountability and high standards of ethical behaviour." She also believes that good governance does not need to, and shouldn't, stifle companies or prevent calculated risks to maximise performance.

Up front there is a lot of work to be done within any company to make sure that the appropriate processes and control mechanisms are in place to assess opportunities and identify potential risks. But once these processes are in place, the company will be in a position to take advantage of whatever opportunities come along by simply applying the criteria. Good governance should not adversely impact performance.

Booker also makes plain that she feels diversity in terms of gender, demography and race is crucial. "One of the problems with boards today is that they are not as diversified as what they should be and, accordingly, they don't always reflect the member base. Diversity, when it is well managed, should result in improved performance."