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The Role of the Board Secretary

Jeffery E. Smith
Reprinted from Acredula -- Spring 2007

The role of the board secretary (or “corporate secretary”) is critical not only in organizing and compiling minutes of meetings, but in assuring compliance with a diverse and complex variety of increasingly important governance and compliance rules that impact the organization. That role, and its corresponding responsibilities, are significantly enhanced when the company is a publicly-traded organization.

Historically viewed as a combination of scrivener and custodian of records, the role of the corporate secretary has expanded to include wide-ranging responsibilities from communication with directors, management and shareholders, to the crucial responsibility of administration of corporate governance and other compliance matters.

While the “job description” can and does vary from organization to organization depending on a number of factors, including the size and complexity of the organization as well as whether the organization is publicly-held, the basic areas of involvement typically include:

• Board and committee meetings

• Annual shareholder meetings

• Corporate records

• Securities compliance and shareholder matters

• Director and officer matters.

Through the role differs depending on the organization, the following are highlights of the typical role of the board secretary in each of the referenced areas.

Board and committee meetings

The secretary is typically responsible for compiling and distributing board meeting packages, including meeting notices, and following up to make certain that there will be adequate attendance to conduct a meeting. The secretary is typically involved in securing appropriate materials from management for inclusion in the board package, and in arranging the physical aspects of the meeting from room reservations to refreshments as well as coordinating any outside attendees.

Equally important is the function of taking and drafting minutes. The “crafting” of minutes is discussed in an article entitled “When it comes to meeting minutes, saying less is often better” in the March 2000 issue of Acredula, which is being updated in a future Acredula issue scheduled later this summer.

Consideration should be given to that fact that some may consider the board secretary to be an “insider” due to the presence and participation in board meetings where material non-public information concerning the company is discussed, and should in most instances, be subject to the company’s insider trading policies. Company legal counsel should be consulted with regard to the applicability of insider trading rules and policies to the board secretary.

While seemingly a minor administrative and ministerial function, the “crafting” of minutes can have a serious impact on the organization and its directors (and other meeting participants) when regulatory, board, customer and shareholder issues arise. Shareholders and others have statutory rights to review and inspect certain corporate records, and can and do have varying motivations to do so. If not carefully and thoughtfully drafted, minutes can, in retrospect, have profound unforeseen and unintended consequences far beyond those anticipated at the time.

Annual shareholder meetings

Like board meetings but on a grander scale, secretaries also typically are charged with much of the organizational aspect of annual shareholder meetings. Internally, board secretaries typically oversee distribution and return of director and officer questionnaires for proxy preparation and may be involved in preparation of the organization’s proxy and annual report as well.

Externally, board secretaries not only assist in oversight and coordination of the shareholder communication process, from compiling shareholder mailing lists to overseeing meeting notices and proxy distribution, but they also assist in coordinating proxy returns, voting compilation, interaction with printers, proxy solicitors and transfer agents, and organization of the meeting itself. Additionally, they conduct the ever-challenging interaction and coordination with company legal counsel, auditors and other professionals involved in the process.

With duties to reserve the room, track the attendance of board members and appropriate management representatives, assist in drafting the chairman’s speech, oversee conduct of the meeting and keep order (not to mention ordering post-meeting refreshments), the role of the board secretary is critical to assuring a smooth shareholder meeting. The board secretary reflects and represents management of the institution, so “glitches” in the shareholder meeting can create significant shareholder relations as well as legal issues for the organization and board. The annual shareholder meeting process presents a stressful and challenging environment, and it takes a calm, cool and collected board secretary to help coordinate a diverse variety of interests to provide a meeting which runs as smooth as possible.

Corporate records

Another important function of the board secretary is the maintenance of appropriate corporate and shareholder records. Not just minutes and governance documents, but the complete range of documents presented at meetings (such as contracts, audit reports and examination reports) and other board and shareholder-related materials. Record maintenance includes safe storage of relevant company records, and assuring that internal and statutory “record retention” requirements are adhered to with regard to corporate and shareholder records.

In a multi-affiliate structure, the role of the board secretary may also include responsibility for separate and distinct affiliate board matters, affiliate shareholder matters, and affiliate regulatory matters, as well as state corporate filings. Additionally, they must make certain that adequate governance actions, activities, minutes and records are maintained separate and distinct for each relevant business entity, with separate files for each business, their respective boards, committees and shareholders. Securities compliance

Securities compliance and shareholder matters

The board secretary often has primary responsibility for matters pertaining to ongoing maintenance of shareholder records, shareholder statistical data, company stock transfers, shareholder communications, company announcements, dividend distributions, state escheat compliance (typically for unclaimed dividends), and day-to-day interaction with market makers, transfer agents and others involved in the stock transfer process.

In the case of publicly-traded securities and exchange-listed companies (i.e. NASDAQ and NYSE-listed stocks), responsibilities may also include involvement in SEC filings, compliance with exchange rules and interaction with exchange personnel. In the public company setting, at least a basic knowledge and understanding of SEC and listing rules is a critical part of the job.

Oftentimes, the smaller the organization is, the greater the role and responsibility of the board secretary with respect to shareholder communication matters. Larger public companies tend to use professional advisors and professional stock transfer agents for most, if not all, of the administrative functions pertaining to shareholder communications and stock transfer issues.

The need for expertise of the board secretary in the areas of securities compliance and shareholder matters varies between organizations, and the knowledge and understanding of the secretary in those areas may dictate the level of involvement in those issues.

Of all the areas of responsibility of the corporate secretary, dealing with SEC compliance matters, shareholder communications, shareholder transactions and market interaction is probably the most complex and the most fraught with potential liability for the organization.

From a shareholder relations perspective, the role is also critical (particularly with smaller organizations) as the secretary is often the “front line” of communication with the shareholder (individual as well as institutional shareholders) and the market, and reflects on management. As a result, these are the areas where the corporate secretary is probably most frequently involved in interaction with company legal counsel, accountants and other public relations professionals. These are also the areas where the secretary should probably most frequently seek and obtain professional assistance when issues arise.

Director and officer matters

Another common role of the corporate secretary is oversight of board communications, compliance by officers and directors with insider-trading “windows”, involvement in the process of compiling and filing stock ownership and transfer (insider trading) filings on behalf of executive officers and directors for public companies, and compliance by officers and directors with a variety of other corporate policies and procedures.

As with shareholder communications, the oversight of Section 16 filings and compliance with other “insider trading” compliance matters is a critical function and one where input from legal counsel should be sought when issues arise. It is also a typical function of the board secretary to assure that appropriate action is taken (and reflected in corporate records) with respect to election and authorization of corporate officers, and with respect to formation and appointment of board committees.

The role of the board secretary is critical to the organization and can have a profound impact on its constituencies and the organization itself. The need for knowledge and expertise in specific areas of law and regulation vary depending on the size and complexity of the organization, and sometimes on the issues confronting the organization irrespective of its size and complexity. The depth of that knowledge and expertise dictates the role of the corporate secretary and the level of involvement and responsibility in certain matters.

As with most things, there is no “one size fits all” with respect to the role and responsibilities of the board secretary. It is incumbent on each organization to carefully define and communicate the expected role and responsibilities of the secretary, to provide appropriate support and training, and to make certain that the right individual occupies the position. It is also important to make certain that the corporate secretary has access to outside professional assistance when issues arise.

The role of the corporate secretary is far more important than just that of company scrivener and custodian of records. The position represents an increasingly critical role in the brave new world of enhanced scrutiny of corporate governance, corporate compliance, and director liability by regulators, the press and aggressive plaintiffs lawyers.

It is a key position within the organization that contains important day-to-day responsibilities, and requires professional training as well as a solid understanding of the role and impact of the position on the organization. When issues arise, the actions of the board secretary and the official records of the organization and its board can be helpful and reaffirming, or embarrassing and damning, to the organization and all involved. The quality of the corporate secretary could make a substantial difference in this outcome.