A long, long time ago, Julius Caesar decided to divorce his second wife Pompeia on the basis of suspicion. Caesar famously said any wife of his must be above suspicion.
Pompeia stood no chance because this is a remarkably high standard that is nearly impossible to attain. More often than not, in-house company secretaries find themselves in a similarly invidious position. The eventful winter at Letshego Holdings Limited has reminded us yet again that one of the most dangerous jobs in the corporate world is that of company secretary. It has also served to proffer another reminder: That it is difficult to serve two masters at the same time – the Board of Directors on one hand and the Managing Director on the other. Company secretaries always have to tread a very thin, perilous line and must therefore have a superabundant capacity for being imaginative on the spot, given the immense perplexities that they have to deal with. Many in-house company secretaries bear scars of ill-usage on their faces and in their emotions, for they are forever in the crosshairs.
By way of a general reminder, the Companies Act stipulates that those with qualifications in law, accounting or belonging to certain professional bodies such as the Institute of Chartered Secretaries are eligible to be appointed to the role of company secretary. While a company’s Board Charter may say the Board should be involved in the hiring of a company secretary, the reality of the situation is that the individual reports directly to the Managing Director with whom he or she spends the working time, unlike with the Board that comes in only during meetings and whose communication with the office between meetings is at best intermittent.
The company secretary is often in an operationally weak position because the Board does not understand the environment in which he or she operates. Boards seem to be of the mistaken view that the company secretary works for them directly or fully. Nothing could be further from the truth. The fact that the fall of an in-house company secretary is often, but unfairly, tied to that of the CEO should disabuse Boards of the view that company secretaries serve them exclusively.
When the Board wants something done, it would naturally communicate with the company secretary, but it should not necessarily expect him or her to act on it immediately, or even ever, even though in the Board’s mind action should be prompt. A conscientious company secretary will first check with the boss in the office if it is something that should be done. If the boss is of the view that it should not, then the Board will be given the run around until it gives up. So when engaging with the Board, the voice of the company secretary is often that of Jacob while the hand is Esau’s. When the Board eventually raises its displeasure about its instructions not being acted upon, the MD might even lay the blame for the lethargy at the door of the company secretary who will have to absorb the punches for the team without wincing.
Therefore, while a Board expects a company secretary to be loyal to it, in reality it is difficult, especially if his or her boss perceives subordinates to be bereft of individual character or opinion. Of course, a company secretary has the option of resigning if they do not agree with the instructions of the boss, but those who resist the pressure from their bosses are suddenly thrust into a hostile working environment and may find themselves being hauled before a disciplinary hearing over some meritless indiscretion. That is always easy to dream up. If the Board is tipped off about the hearing, it will be advised to stay away from operational matters, with the outcome for the embattled company secretary being only one – dismissal. A report will then be prepared for noting by the Board at the next meeting facilitated by an acting company secretary.
The opposite situation is where a Board is very keen on operational matters and thus not able to observe where its boundary ends, creating an opaque corporate governance environment in the process. Admittedly, the enthusiasm of a Board sometimes arises out of frustration because Management imposes what is essentially a prophylactic ban on Directors to break their spirits and thus give up constantly asking for this or that to be done. This tactic effectively denudes Directors their plenary authority to govern the business. A company secretary in such a situation is often left shuttling helplessly between the Board and the MD as if they have left their critical faculties behind.
Therefore, contrary to the glamour associated with the role, in-house company secretaries are hardly ever very pleasantly situated in their employ. In fact, many former in-house company secretaries who did the gig for a long time hardly ever want to trouble their heads with the role again.
Company secretaries also often find it difficult to confide in Board Members about their challenges because one just never knows how close respective Board Members are to the Managing Director. It is in this context that Boards should understand why, outside of actual meetings of the Board, pragmatic company secretaries hardly have any contact with them. In-house company secretaries only are in congenial company within themselves because they strike no commanding deportment with either the Board or the managing director.
In acknowledgement of the precepts of experience, a possible solution for the trust deficit between company secretaries and Boards seems to lie in the reconfiguration of appointments to this role. Perhaps in-house company secretaries should be abolished in favour of external ones who are appointed like external auditors at shareholders meetings for a set term.
That way they can objectively assess requests from the Board and Management objectively because they would not necessarily be beholden to either. Management seems to hold little sway over external company secretaries and Boards tend to be more satisfied with the service they receive from them. Nevertheless, until a solution is found to the conundrum that in-house company secretaries face, their professional circumstances will continue to be twisted into a state of constant bedevilment.
*SIPHO H. SHOWA was a Board/Company Secretary for more than 15 years. He writes in his personal capacity.