By ADEYEMI, Bisi
As the English Court of Appeal ruled in Panorama Developments (Guildford) Ltd V. Fidelis Furnishing Fabrics Ltd (1971), “a Company Secretary is the chief administrative officer of the company”. In Adebesin V. May & Baker Nigeria Ltd, (1977) 3 FRCR 117, Justice Karibi-Whyte (as he then was)also stated that – “…the secretary is an officer of the company with important duties and responsibilities. The secretary merely acts in a ministerial and administrative capacity. He has no managerial functions and any managerial powers are prima facie vested in the Directors and any Managing Director.”
Although, historically, the role of the Company Secretary was an administrative one, it has since evolved significantly over time and as DS Mitchell, Chairman, Company Secretaries Group, Institute of Chartered Secretaries and Administrators, United Kingdom put it,“The Company Secretary occupies a privileged position and is uniquely well-placed to act as a catalyst for good corporate governance” -.The Company Secretary is now regarded as “The Corporate Governance Professional” – Dr. Christopher Kolade at the 3rd DCSL Company Secretaries’ Roundtable.
An Executive Director is a member of the Board of Directors who is also a full-time employee with clearlydefined executive responsibilities. An Executive Director is involved in the day to day operations of the organisation and is responsible for providing leadership, executing strategy, operational planning and effective management. She is a member of the Board of Directors which the law defines as “persons duly appointed to direct and manage the business of the company”. Her legal position as an Executive Director is the same as any other Director of the Company.
A Director stands in a fiduciary relationship towards the company and must observe utmost good faith towards the company in any transaction with or for the company. She must act at all times in what she believes to be the best interest of the company. As fiduciaries, Directors must not place themselves in positions of potential conflict between their duties and responsibilities to the company and their personal interest or place themselves in a positon where their judgement is likely to be biased or impaired. A Director must meet the minimum common law and statutory requirement of “good faith”.As opposed to Directors who are fiduciaries, a Company Secretary does not owe fiduciary duties to the company, except where she is acting as agent of the company. (Section 297 of CAMA).
A Company Secretary’s role entails ensuring the promotion of high standards of corporate governance within the organisation, providing assistance to ensure the effectiveness of the Board as a whole and acting as an advisor to the Board. She holds office based on the concepts of independence and trust and is a key participant in the enthronement of corporate governance best practice. She serves as an interface between the Board and Management and as such acts as an important link between the Board and the business.
Given the distinct nature of the duties and responsibilities of a Company Secretary vis-à-vis those of an Executive Director, several potential areas of conflict exist from the combination of thetwo roles. The fact that the Company Secretary is expected to be independent of Managementis a potential area of conflict where the role is combined with that of an Executive Director as the latter is effectively,an integral part of Management.
Where there is no clear delineation of responsibilities of these two distinct roles, the Company Secretary’s role in entrenching a culture of good governance within the organisation may likely be compromised. Organisations seeking to entrench best corporate governance practices must therefore ensure that the Company Secretary’s role as the “conscience of the Company” is not endangered by the combination of an executive management role. A clear delineation of the roles and reporting lines as well as a clear definition of the responsibilities and expectations from both roles will help minimize potential areas of a conflict. It is also important for the holder of the office to have a clear understanding as well as be able to meet the expectations of the different stakeholders. She must ensure that no stakeholder interest is compromised or misplaced. Ultimately, the individual wearing both hats has a responsibility to ensure that her dual roles do not portend a conflict of interest sitting quietly in the boardroom, just waiting to explode into a corporate disaster.
It is also critical that the Executive Director/Company Secretary ensures that at all times, her interests are aligned with those of the organization and that every action is taken in the best interest of the organization. Ethical and personal values are key to the effective discharge of the duties of a Company Secretary who is also an Executive Director on the Board. The growing emphasis on ethics globally demands crystalline clarity, especially from persons with access to the boardroom.It is advisable that where it is not possible to effectively carry out both functions, a choice is made between the two roles such that the best interest of the organisation is served. Consideration must also be given to the time commitment that will be required to discharge the duties of the two distinct roles effectively and how to strike an appropriate balance between the responsibilities of each position.
As the trend begins to catch on in Nigeria, due regard should be had to the overall interest of the organization, which may be better served by promoting the Company Secretary to an Executive Director with new responsibilities, and appointing her understudy as Company Secretary. A Company Secretary who has paid sufficient attention to the business and acquired requisite skills, would find it easier transiting to an Executive Director role where this is the desired career move.
ADEYEMI, Bisi is the Managing Director DCSL Corporate Services Limited.
Email: badeyemi@dcsl.com.ng|www.dcsl.com.ng
