Governance Bites #72: Chartered Secretaries, with Angus Ogilvie

In this episode, I talk to Angus Ogilvie about Chartered Secretaries. He outlines what a Chartered Secretary is, and what is involved in becoming one. I ask about the role of the Chartered Secretary, and who could benefit from having one. He outlines the benefits of a Chartered Secretary, and the various ways an entity could engage one (particularly if the entity does not have the resources to engage one full time). Angus also shares the advice he would give to a new director. 
Angus Ogilvie is Deputy President and a Chartered Fellow of the Chartered Governance Institute of New Zealand. He is also a Fellow of CPA Australia (a Certified Practising Accountant), a full member of the International Fiscal Association, a Member of the Institute of Directors, and a Chartered Management Accountant (Chartered Institute of Management Accountants). With his company, Generate Accounting, he and his team provide strategic planning, accounting services, and tax advice to directors of growth-oriented companies and for-purpose organisations.
#governance, #leadership, #corporategovernance, #boardcraft, #decisionmaking, #makingadifference, #ceo, #governancebites, #boardroom , #cgi, #charteredgovernanceinstitute, #cginz

Transcript

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Well, Mark, thanks so much for the opportunity. I'm Angus Ogilvie. I'm an accountant in practice, and I specialise in tax advice for small to medium-sized enterprises. We also do quite a lot of compliance work, of course, as an accounting firm, as well. In my spare time, I'm Deputy President and a Chartered Fellow of the Chartered Governance Institute in New Zealand. That used to be called the Institute of Chartered Secretaries, and more recently, Governance New Zealand, but because we just love to change things up, we're now the Chartered Governance Institute of New Zealand. I'm also a Fellow of CPA [Certified Practising Accountant] Australia, one of the largest accounting bodies in the world. At Generate Accounting, our team provides strategic planning, accounting services, and, of course, as I mentioned, tax advice to directors, primarily of growth- oriented companies. Increasingly, we do a lot of work with charities and for-purpose organisations as well. Okay, so given your role with the Chartered Governance Institute, a great person to talk to about chartered secretaries. Hopefully. Hi, welcome to Governance Bites. I'm Mark Banicevich, and as you just heard, today I have the pleasure of spending time with Angus Ogilvie. Angus, thank you very much for your time today. No worries. You, as you've said, are Deputy President of the Chartered Governance Institute, which recently renamed to coincide with the rest of the global entity, right? So, starting at the beginning, as the entity that essentially started out qualifying chartered secretaries, what is a chartered secretary? A chartered secretary is typically somebody who is, I suppose, academically trained in areas relating to corporate governance— so certainly in law, accountancy and finance, risk, compliance with the Companies Act and other pieces of legislation, and strategy, importantly, as well. So, they tend to be an indispensable resource for boards. In terms of how they might interact with a board, they will probably set agendas in conjunction with the chair, they'll produce the minutes, they'll help induct new people onto boards, and they'll ensure that the company is compliant with the various legislation. Do you tend to find, then, that sometimes the chartered secretary is the most knowledgeable person about governance on the board? Or in the boardroom? Well, you might very well say that, Mark, but I couldn't possibly comment. But certainly, the one with the most formal training, I would think. Right. And so they should be relied upon to guide the board through any compliance issues and also to ensure that the board has routine, and regularly reviews policies and strategies throughout the course of a calendar year. Right. You mentioned when we were talking earlier that part of that training is also around the listing rules, so they know a lot about listing rules for a larger company, as well. And that prior to 1993, larger companies were required to have a chartered secretary. Yes, whereas that's no longer a requirement it's certainly still an area of value. Not in New Zealand, although it still is overseas. Still required overseas. Right. What is involved in becoming a chartered secretary? Well, anyone who has a postgraduate degree would certainly be in a position to embark on that course. Anybody who's interested in corporate governance and administration of companies can become a chartered secretary. Certainly, if you have undergraduate qualifications in accountancy or in law, the education is slightly more truncated. So, in the case of accountants and lawyers, there are typically only two courses they need to do, and they get recognition of prior learning in terms of their undergraduate qualification. For those who haven't gone through a commerce or a law background, then there are six courses that they would do. Recently, we have made it easier for MBA graduates, with recognition of prior learning there too, so that in some instances they can get credit for three of the six courses, depending on which institution they qualified through. And those courses are essentially the same sort of structure as a postgraduate course, right. Very much so, yes. A full semester of work, a three-hour exam at the end, and as you were saying earlier, it's worth 40% of the mark, and then two internal assessments worth 60%. So, it's a fairly solid undertaking; it’s not a light business, one-day course. No. It's a fairly intensive piece of work. It’s academically rigorous. I think that’s the important thing to note. So, it tends to be taught by academics. There are six core courses. Again, some will get recognition based on prior qualifications, but we have courses in corporate governance and corporate accountability, finance for decision-making(which is essentially accountancy and interpreting financial documents), risk and compliance, corporate law, and development of strategy. Right, so all of the elements that together would make somebody a good director. It would seem that a chartered secretary would also be a good candidate to be a director as well? Absolutely. There’s a direction that's aligned with it, too. Another qualification we offer called Chartered Governance Professional. Which is more aimed at somebody who wanted to pursue a directorship, but again, there will be some core topics to both qualifications. What is the role of a chartered secretary? Well, it's first and foremost, a chartered secretary is there to administer the company. Traditionally, they were called administrators, company administrators. So, part of the role is to ensure that there's compliance with the Companies Act — that is, Companies Office administration. In larger companies, a chartered secretary would be responsible for complying with the listing rules on the NZX [New Zealand Exchange]. They're also there to essentially be, if you like, a secretariat for the board. So they will liaise with the chair, in particular, to compile agendas, pull together the necessary documents for a board meeting in terms of background, strategy documents, that sort of thing. They'll also guide the board through any considerations around compliance or risk. They’ll certainly almost always compile the minutes from a meeting. And importantly, the action items that spill out of each board meeting. Right, right. And it’s in that role, as you mentioned, that, depending on the skill and capability of directors, because there’s no requirements to become a director of a company in New Zealand. No, no. It’s purely around how the company selects the skill sets they want on the board. Quite often, companies will be targeting particular skills that aren’t necessarily about being directors. They might be specialist skills — about being an economist or, you know, someone I used to work with at the University of Auckland was put on a significant board because of his background in finance, for example. So, on that basis, the chartered secretary would be the person to make sure that all the i’s are dotted, and all the t’s are crossed, and everything is done? Very much so, and of course part of it is the induction of the board members coming on board, too. So, the — you know, I think a common criticism, hopefully not as prevalent as it once was, is that there is a tendency to defer to people, for instance, with a finance background on the board by other board members who may not have that skill set. And, of course, you can't abdicate your responsibility to somebody else. You need a modicum of skill to be able to ensure that you're asking the right questions of the financial statements. Ensuring that the company is solvent, is likely to remain solvent— that’s kind of an important part of the Companies Act. Yes. So, you know, a competent corporate secretary — well, chartered secretary — would be able to guide people through some of that, too. Okay, okay. You mentioned before that the chartered secretary would work with the chair to make the agenda and so forth. With whom else does the chartered secretary tend to work in the company? With whom do they work. Well, they may also become involved in the subcommittees of the boards as well. So, if there's a finance, audit, and risk subcommittee, they would probably again liaise with the chair of that. Do the agendas, make sure they are liaising with the finance team when they produce a pack for that meeting. And again make sure that the meeting covers off all the necessary compliance. So really, the job of a competent chartered secretary is, you know, a key part of it is compliance — to make sure that the business is retaining its compliance with various regulation, with legislation. But it's much broader than that in this day and age. So, there is, for instance, a growing focus on risk for most organisations, and chartered secretaries are adept at understanding the exposure to risks within enterprises and ensuring that, you know, there’s appropriate airtime for boards. Right, right. Do they tend to work with CEOs [Chief Executive Officers] and executive teams as well, in terms of producing the board pack? That’ll depend on the board entirely. So, it depends, of course, whether the CEO is a member of the board. I suppose the chartered secretaries in a corporate environment may actually report to the CEO. In smaller organisations, they may report to the chair. But absolutely, it’s not a role that is intended to be exclusively for the board, and they should be there to advise the executive as well. Okay, okay. Now, clearly, there are a number of benefits of having a chartered secretary, but it also comes with a cost — they won’t be cheap members of staff by any means. So, who would have that benefit outweigh the cost? What sort of entities would benefit from having a chartered secretary? Well, certainly larger organisations tend to have somebody in a chartered secretary’s role. Some will have what they call a corporate counsel, who will be typically a lawyer who is trained in commercial law, in particular. But most larger organisations will have somebody who takes that secretarial role. Smaller organisations, of course, can use chartered secretaries for hire. So, there are, for instance, a number of accountants in practice, like myself, who offer chartered secretary skills. But that may also be in conjunction with them assembling financial information for that organisation, etc. So, it’s horses for courses. At the very least, most organisations that have a board, be it a not-for-profit or a corporate organisation, will have a minute secretary, and so that there is some systemisation of record-keeping at least. Whether that person is entirely competent to advise the board on compliance matters and other issues is probably moot. Right. So there’ll be some organisations that may have a full-time chartered secretary, which may have a position like the company secretary or the legal counsel. Yes. There’ll be entities for whom having a full-time person probably won’t meet financial requirements, so they might have one part-time, or they might hire somebody in for that purpose. And there’ll be companies that might have a board secretary instead, who would essentially do the work, kind of like an EA [executive assistant], that would take the minutes and those sorts of things, - Correct. - but not necessarily, as you say, have the qualifications and the skills of a company secretary or a chartered secretary. Correct. So it will have some element of scale and complexity, I guess, that's involved. Very much so, yeah. The more an entity has compliance requirements, I'm sure the greater the need for a secretary. What we’ve certainly noticed is the growth of for-purpose, or what used to be called not-for-profits. There’s a real hunger for chartered secretarial skills, principally as they professionalise and become less volunteer-based and become more professional organisations, and the onus on board members of for-purpose organisations continues, you know, the responsibilities continue to increase. So I suppose, ultimately, the chartered secretary plays a significant role in terms of mitigating risk or at least making board members aware of risk And managing the compliance with various statutes, and so forth. Yeah. The for-purpose organisations are an interesting one. Because again, there’s a massive scale variation in that space. The large ones, I’m sure, you know, may be in a position to have one on staff, but a lot of the smaller ones — you know you need 15 people to incorporate a society. That’s right. So a lot of them won’t have the capability. The other observation I’d make — and this is changing, so it's unfair to generalise about this — but you know, if you consider the process that you go through to get a new job, for argument’s sake. So you would compile a CV [curriculum vitae], you would find suitable positions that you wanted to apply for, you might go through a recruitment agency, you might have an initial interview with the recruiter. You then might be shortlisted by the company and have an initial interview with the hiring manager. If you're then successful with that, you might have a second interview with the hiring manager's managers in turn, so more senior management. Aligned with that, they might check your qualifications, they might do a psychometric test to make sure that you will fit into the culture there. You might even have a third round of interviews, as well. So there’s a lot of rigour around the recruitment process. Certainly, even to this day, there are quite significant for-purpose organisations who simply, if somebody puts their hand up at an annual general meeting, all of a sudden they’re on the board. Yes. And so there’s no concept around a skills matrix, for argument's sake. Are we attracting the right sort of talent onto the board? Do they have, you know, a bare minimum in terms of governance training, etc.? And so I think that that is filtering through to the need to have some advice. Absolutely. I’ve got one final question for you, then. A little bit of a change in topic. What advice would you give to a new director? Well, the age-old advice, of course, is ‘sit there and say nothing for about 12 months,’ and I don’t think that’s anywhere near fit for purpose anymore. So I think my advice to directors is to become passionate in terms of understanding the company in detail. Or the for-purpose organisation. If it’s possible to invest time in meeting staff, if you're allowed to do that, to actually get on the shop floor to understand the business. Also, understand the various... the structure of the board. So, you know, is there a charter which governs how the board is managed? How your fellow directors are selected. What the expectations of board members are. Invest time in understanding the work of the Finance, Audit and Risk Committee. And engrossing yourself in the business, and asking lots of questions. I think the days are long gone when new board members should sit there with their heads down for 12 to 18 months before they dare ask something that’s pertinent to the board meeting. Absolutely. And I would say, as I mentioned before, you know, there’s no qualification to become a director in this country. At the largest scale, you have very sophisticated businesses that are going through the kind of rigour that you’re talking about to recruit a director. At the other end, you’ve got people that are tapped on the shoulder,- Yes! Yes. - friends, family, and so forth, and people that stick their hands up in AGMs. And so taking from, you know, extrapolating on what you’ve said, when you first enter a board, if they haven’t got a strong induction process, kind of insist on it by asking questions. I think so. Understand the role. And ask those questions before committing to it. Right. And I believe, you know, if a board is serious about the process, it should be a two-way conversation. So if I was a potential director considering an appointment, I would want access to financial records and a whole bunch of information on a confidential basis, of course, - Yes. - to ensure that, you know, I was going in with my eyes wide open. Yes, you certainly don’t want to be jumping onto a board that’s on its way out - No. - it will get you into a lot of trouble. Well, Angus, thank you very much for your time. Appreciate the conversation. I look forward to catching up again soon. Excellent. See you next episode. I’ve enjoyed it, thank you.