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CCCA_V4No1_Reinventing-FIN.qxd:CCCA_V1No1_DriversSeat-FIN.qxd 2/3/10 1:30 PM Page 34 Feature “It’s really a job to stay current and understand what the devel- you can answer their questions and provide evidence in min- opments are in the disclosure rules. I think that militates in favour utes,” says Masse.That makes a really good document manage- of a trend where non-lawyers are increasingly uncomfortable in ment system a necessity, not a frill. the corporate secretary role.” “My department deals with a lot of topics and responsibilities.We The proliferation of new disclosure rules reached its zenith in have compliance obligations in 95 jurisdictions worldwide, every the United States with the passage of the Sarbanes-Oxley Act in state, province, [including] securities commissions, stock exchanges, 2002.Corporate scandals such as Enron prompted a review of leg- most countries in Europe. It’s a huge undertaking,” he says. islative audit requirements to protect investors by improving the Corporate secretaries need a method to document all the mat- accuracy and reliability of corporate disclosures. ters they are dealing with and be able to retrieve the information The act expands disclosure requirements and introduces crimi- in a year and a half.And a good documentation method, backed nal and civil penalties for securities violations, with significantly up by information systems, can eliminate unnecessary work. longer jail sentences and larger fines for corporate executives who “One of the things that is really key to doing the job efficient- knowingly and willfully misstate financial statements. ly because our budgets are always under pressure …is you have to In Canada,a national policy on corporate governance guidelines be allergic to reinventing the wheel,” says Masse.“I always amaze was released in 2005 based on recommendations from the joint myself when I look at something and it seems to be an issue of corporate governance committee chaired by Guylaine Saucier and first impression and then I check the filing system, and sure sponsored by the Toronto Stock Exchange, Canadian Institute of enough,there is a file on it.…It saves 48 hours of work.That’s the Chartered Accountants and the CanadianVenture Exchange. key to doing the job effectively.” Among the committee’s recommendations:every board should Staying on top of never-ending changes in regulation is one of have a charter setting out its responsibilities which should be dis- the biggest challenges, adds Pettie. closed to shareholders; the board must assume responsibility for “You can’t just clone what you did last year:You have to look adoption of a strategic planning process, identification of the at it and make sure it continues to meet the requirements and if principle risks of the enterprise’s business, the company’s com- there are new requirements coming. …You have to be ready to munications policy and compliance,and the integrity of its inter- meet the deadlines, and it may take a year of preparation to be nal control systems. ready. So it’s knowing what the changes are… and what you need (In November, the Canadian Securities Administrators to do to change now so you’ll be able to meet the requirements announced that it was putting proposed changes to the corporate when they come.” governance regime on the back burner, citing concerns over business sustainability issues in the current economic environ- Develop strong diplomatic skills ment. There was also reluctance to abandon a rules-based The corporate secretary role is played out at the highest level of the approach for a principles-based regime.) company and that can be a tricky place to be, Masse points out. The other significant change in the past five years is the require- “The board of directors is like a cauldron in a foundry:the tem- ment for CEOs and CFOs to certify the effectiveness of financial peratures are very, very high and there is very little tolerance for controls to ensure financial statements are accurate and that regu- risk or failure.And the political forces at play are enormous.” latory disclosure requirements have been met in a timely way. The corporate secretary sometimes has to deliver words of cau- Closer attention is also being paid to the relationship between tion that businessmen don’t necessarily want to hear because they compensation and risk: Does a company’s remuneration policy “don’t like anybody applying friction or brakes to any kind of encourage unreasonable risk-taking? In some cases, this has led to process.” But doing the job effectively requires strong diplomatic an insistence on clawback provisions for situations where per- skills in addition to legal acumen. And “you have to bolster that formance compensation turns out to be a mistake because finan- with the ability to operate under pressure,” Masse says. cial statements have been restated, Masse says. Discretion, tact, and conflict resolution skills are also important, It all translates into new challenges for the corporate secretary. Pettie says.“The role can also steward the whole process around Here is some advice on how to succeed: the ethical tone of the company… and the culture that’s reflected in the company’s vision and values. Being a discreet person with PIERRE CHARBONNEAU Learn how to manage the process high ethical standards is important to deal with the type of diffi- When external auditors come calling,“they really love you when cult, but highly important issues you have to deal with in the role.” 34 CCCA Canadian Corporate Counsel Association SPRING 2010