Should the GC also be the company secretary?
According to KPMG, opinion is divided as to whether the general counsel should also wear the hat of company secretary.
In its “Restoring Corporate Trust” report, which was put together on the bank of more than 25 “detailed interviews” with more than 25 general counsel of ASX 100 companies, not-for-profit organisations and private companies, KPMG found that GCs are “almost equally divided” as to whether they should also be the company secretary.
Advocates for the dual role pointed to a number of synergies in the roles, KPMG wrote.
“However, the dominant explanation for performing both functions was access to the board. A number of GCs expressed a view that they could not adequately undertake the role of GC without access to the board and the company secretary role provided that access,” it said.
“GCs tended to point to being privy to board deliberations rather than board members themselves was the key to being an effective GC. It was suggested this understanding of the strategic deliberations and risk appetite, enabled the GC to provide more commercial and actionable legal advice.”
The importance of being both the GC and the company secretary appeared, KPMG continued, to be impacted by whether or not the GC reported directly to the CEO.
“In situations where this direct reporting line did not exist, it was viewed as much more important to have the access to the strategic deliberations of the board,” it wrote.
“However, among the GCs interviewed there were equally as many who firmly believed the GC should not be the company secretary.”
There were principally two justifications for the need for role separation, KPMG outlined: one, that the roles are too big for one person, and two, that it can present irreconcilable conﬂicts, or at least lead to confusion as to which hat is being worn.
“There was some agreement that for smaller organisations or those operating outside a listed environment, the workload might be manageable for one person. However, a number of those advocating for a separation of the roles were of the view that in an ASX 100-listed environment the workload could inhibit performance of both roles effectively,” KPMG said.
“It was suggested that these issues were particularly acute when the company was in crisis or ‘deal mode’ and issues of continuous disclosure were in play. Other GCs pointed to what they believed to be irreconcilable conﬂicts between the two roles to explain why the roles should be separated.
“There was however, almost universal agreement from all of the GC interviewed that if the company secretary was not the GC then there was a clear advantage for them to be legally trained in order to execute the role effectively.”
“General counsel generally felt the need to be more involved in the day-to-day operations of their companies, to work closely with other departments and to understand better the way their business works,” KPMG wrote.