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Column: Code of Good Governance (16)

Hubert Rampersad

Following up on my previous article:

Relationship with company’s management and investors/shareholders

It is the board’s responsibility to implement a formal and well-defined management structure and then perform periodic monitoring and supervision of management’s performance. The board shall appoint officers whose authority shall include management and operation of current activities of the company, reporting to and under the direction of the board. The board should get directly involved in appointing the CEO/ President, Chief Financial Officer, Corporate Secretary and Internal Auditor. Each of these senior management members must have a proper description of the duties and responsibilities to be performed, rights and powers and internal reporting responsibilities. The board shall adopt by-laws prescribing each senior officer’s title, authorities, duties and internal reporting responsibilities. The key responsibilities of each officer should be defined as well, such as:

· CEO: shall have authority to act generally in the company’s name, representing the company’s interests in concluding transactions on the company’s behalf and giving instructions to other officers and company employees.

· Chief Financial Officer: shall be responsible and accountable for the complete, timely, reliable and accurate preparation of the company’s financial statements, in accordance with the accounting standards and policies of the company; and for presenting the board with a balanced and understandable assessment of the company’s financial position.

· Corporate Secretary: The duties shall include arranging, recording and following up on the actions, decisions and meeting of the board and of the shareholders in books to be kept for that purpose.

· Internal Auditor: The duties shall include providing an independent and objective review of the efficiency of the company’s operations. This would include a review of the accuracy and reliability of the company’s accounting records and financial reports as well as a review of the adequacy and effectiveness of the company’s risk management, control, and governance process.

The board is also responsible for ensuring the continued operations of the business in case key person(s) become unavailable. The board should get closely involved in the succession planning process to identify, define, and train suitable backup personnel in case primary person(s) become unavailable. Both short-term and long-term succession plans should be considered. At least annually the board shall review and concur in a succession plan addressing the policies and principles for selecting a successor to the CEO, both in emergencies and in the normal course of business. The succession plan should include an assessment of the experience, performance, skills, and planned career paths for possible successors to the CEO. The board of directors should also assign goals and targets for the senior management, including CEO. These should be aligned with the business strategy and should be challenging yet realistic. The Chairman of the board should review performance of CEO against the pre-defined targets. The board is also responsible to maintain relationship with the shareholders of the company.

Corporate Secretary

Corporate Secretary or Board Secretary is the term used to define a senior level officer in an organization who is tasked with coordinating all aspects of board functions. Corporate secretary is a person who is given general responsibility for reviewing the company’s procedures and advising the board directly on such matters. We recommend that whenever practical, the Corporate Secretary should be a person with legal or similar professional experience and training. As discussed above, the duties of corporate secretary include arranging, recording and following up on the actions, decisions and meeting of the board and of the shareholders.

The Corporate Secretary should keep open and continuous channels with all members of the board, and should provide any information requested by the board member in timely fashion. The Corporate Secretary is also responsible for ensuring that all directors have filled out relevant conflict of interest, code of conduct and other documents; regulators have approved the appointment of new directors or have approved renewal of terms for existing directors, etc. For these tasks, the Corporate Secretary works in close coordination with Nomination and Remuneration Committees of the board of directors. Due to the importance of this role in overall functioning of the board, we advise that the appointment and removal of the Corporate Secretary should be a matter for the board as a whole, not for the CEO or any other officer.

This article will be continued in the next part of this column.

Hubert Rampersad

Hubert Rampersad is president at Business School of the Americas. This column is drawn from his new book “Authentic Governance; Aligning Personal Governance with Corporate Governance” (Hubert Rampersad & Saleh Hussain, Springer USA, New York, 2013). He can be reached at ; | His books | His interviews in BusinessWeek & Fortune Magazine | His You Tube Video