Volume IV Copyright 2003 ISBN 0-9582416-2-7
First Printed 2000 Reprinted 2003
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Introduction - The Role of The Company Secretary
Role Definition of The Board
Getting Started - Board Evaluation Framework
Appendix I: Directors’ Assessment Form: An evaluation framework
Directors’ Peer Evaluation Form
The Institute Code of Professional Ethics and Conduct
Our members add value to organisations in key roles where there is a
requirement for integrity combined with a sound knowledge of business. This
ensures an effective operation within legislation, regulations, best practice,
and the code of ethics. The depth and breadth of the initial training and the
flexibility of the continuing professional development programmes enable members
to apply knowledge and expertise in all sectors – companies, local government,
not-for-profit organisations, armed forces, universities, schools and hospitals.
With the strong support of a worldwide institute and the requirement to
meet and maintain the highest standards of probity and ethical behaviour,
members are true professionals.
Institute represents the very best in current practice. It is in the unique
position of being able to speak authoritatively on the issues affecting the way
organisations operate. In providing this support for members and enforcing a
strictly ethical code of conduct, the Institute ensures the continuing
independence and highest possible standards of the profession
document produced by the Chartered Secretaries New Zealand Inc. is intended to
be an authoritative guide to the role that the Company Secretary can play in the
evaluation of board and director performance for New Zealand public and private
registered companies, and not-for-profit organisations.
We record our appreciation and thanks to Mark Robertson Shaw of the
F.I.R.S.T Foundation who prepared this booklet.
INTRODUCTION - THE ROLE OF THE
successful company seeks to be successful in all areas within the organisation
and is responsible for tackling those areas that are not pulling their weight.
The boardroom is not exempt from this scrutiny. It has to be as effective as any
other area in adding value through performance. The days are long gone when the
Mom and Pop investor put their hard-earned savings into a company on the basis
of the name of a company director.
If it is good enough for the rest of the company why should the board be
This booklet sets out the basis for the central role that
the Company Secretary can and should play in such a boardroom audit and
evaluation process in the company’s own interests.
The role of the Company Secretary varies widely depending upon the size
and nature of the company. In many cases the duties of the Company Secretary are
an add-on to other executive responsibility and may be seen as a minor part of
that executive’s overall position. In the case of large public companies the
secretary’s job is a full time one. The role of the Company Secretary,
particularly in a large company, carries with it very considerable
responsibilities and can be influential in determining the course and success of
the company. It is also a position which has inherent in it a potential for
significant conflict and therefore demands the exercise of judgement and
The role of the Company Secretary therefore is not always easy, and
often requires the exercise of considerable diplomacy and sensitivity in
carrying out the duties of good faith and loyalty. The Company Secretary has a special obligation and duty to the board,
which is independent of the obligation to the chief executive. The Company
Secretary has a very clear duty to report to the Chairman any concerns, which
the Secretary may have, about any aspects of the operation of the company.
Obviously this is a duty to be exercised with discretion. The Company
Secretary is not the spy for the board and the duty would not require the
reporting of trivial matters. However, as the Secretary is in a unique position
to be aware of what is going on in the company, failure to report a situation of
which the Secretary knew, or ought to have known, can place the Secretary in a
position of personal liability.
For the Company Secretary, who although no longer specifically mentioned
in the Companies Act 1993, the deemed director provisions are a cause for
concern for the simple reason that while not an appointed director the Company
Secretary may be exposed to statutory disclosure obligations, and to liabilities
as if he or she were an appointed director.
Where a genuine desire to encourage superior performance by boards
exists, then a Company Secretary can play an immensely useful role in helping to
establish appropriate systems, attitudes and behaviours. As an example, the
content and structure of board presentations and papers can have a considerable
impact on the way in which the board operates. It is not unknown for board
papers to be written in a way that allows for only one conclusion (i.e.
managements’ preferred position) to be reached. The content of papers can also
have other effects. Every board paper should include a section in which
management outline how the proposed action or policy relates to the company’s
values and principles. This not only helps shape the thinking of management, but
also helps to focus the minds of directors on key issues of concern to the
handling all the legal complexities which affect companies, the board secretary
is the chairman’s and the company’s first line of defence…In deciding on
the board agenda, the board secretary and the chairman also agree what
information board members should receive in support of the items on it.2
Beyond this there is the benefit of the Company Secretary playing a more
proactive and creative role in the process. Rather than sitting back and merely
reporting on the relative success or failure of the board, a Company Secretary,
in consultation with the Chairman and CEO should be in a position to assist in
the process of continuous improvement by the board. The Company Secretary can
work back from the board into management in a way that creates a supportive
environment for superior board performance in which management shares in the
responsibility for how a board performs. It is management that has the capacity
to bring out the best performance of the board and directors. Many managers are
skilled at giving directors what they want and not what they need and are happy
to allow directors to look at the world through a distorted lens keeping them
It is the
Company Secretary’s function to brief managers on the character of directors.
This will allow managers to operate more comfortably when presenting to the
board and allow them to ensure that individual concerns are met, while at the
same time covering issues of particular importance.
Through the assembling of reports, preparation of material for meetings
and the provision of reports to the board, along with their attendance at board
meetings, the Company Secretary will have as complete a knowledge as any
director, or other executive of the company, through their access to this
confidential and sensitive information.
There is thus a crucial role to be played by the Company Secretary in
the evaluation of board and director performance by acting as a clearing-house
for the evaluation process, for what is likely to be remarkably sensitive
information. It is essential that
the Company Secretary enjoys the complete trust and confidence of directors and
those who supply information as part of the review of board and director
performance. There is no simple technique for building this kind of trust. It
is, in large part, a function of the quality of inter-personal relationships and
the general competence of the company secretary. The question of trust is
person within the company is likely to hold a position that so well equips them
to participate in the performance evaluation of directors individually and of
the board as a whole. Any lack of trust and discretion, will however, rule out
any proper board evaluation, unless it is carried out by a totally independent
As to the
use of an independent ‘facilitator’ it would be doubtful that they would be
in a position to pass judgement on what they did not know and it would be
doubtful that anyone who had not been present for all of each board meeting
would be able to assist in answering questions usefully. It is unreasonable to
ask any consultant who has not seen the board in action over a reasonable period
to express a view on its performance.
CONFORMANCE EVALUATION IS
ONLY PART OF PERFORMANCE EVALUATION
If an increase in personal liability resulting from the Companies Act
1993 and other recent legislation was meant to concentrate the minds of
directors on their duties then it has succeeded. A resultant downside however is
that boards may focus on conformance at the expense of performance, as directors
may consider that their first duty is to protect their own position and only
after that will they look to improving the performance of the company.
High quality performance needs to be borne in mind by those evaluating
boards. It is not sufficient for a board to consider that it has been a good
year if they have kept out of trouble. Such an approach places excessive focus
on whether board members have satisfied the limited formal requirements for
‘good’ corporate governance by reducing such requirements to a check-list,
which may include:
This list of items should not be dismissed. Items such as these need to be evaluated, to ensure
If the performance of boards are to be addressed, then a far wider range
of issues and competencies need to be considered. In identifying these, as a
rule of thumb, the question is –
should directors be doing in order to add value to the operations of the
The answer to this question will help to identify issues for assessment
that cannot and should not be reduced to a simple template or checklist.
Performance issues to be assessed may include
The assessment of boards is so context-specific that the above generic
list of core competencies is only of use as a starting point. These issues
listed above are significantly different from those of conformance questions
where they related specifically to the impersonal structure and performance of
the board, rather than focussing on the individual and collective performance of
The kind of issues listed under the conformance questions lend
themselves to a fairly objective kind of assessment that is more easily able to
be reported on. There is no trick in determining if there is an audit committee
– there either is or there is not.
The Company Secretary should have a conformance checklist as part of the
routine reporting exercise and it should also be a part of the Company
Secretary’s own annual review process.
The items listed in the performance area require a somewhat more subjective assessment to be made. For example the quality of a director’s contribution cannot be measured merely by the frequency with which he or she speaks
ROLE DEFINITION OF THE BOARD
The role definition of the board is the basis of the framework against
which the board and each director’s individual performance and contribution
should be assessed. The criteria
that each director is evaluated against should be developed from the description
of board functions. Effective and meaningful evaluation of the board and its
directors can only be carried out once the board has determined its own
There are three principal questions that boards should ask themselves
When considering what it should be doing, the board may well review the
list of matters reserved for the board, the statements of delegations and its
annual agenda. Once these matters are settled there is unlikely to be much
change in succeeding years
Did the board allocate appropriate time to the right things throughout
This covers such matters as whether the information the board receives
is too detailed or not detailed enough, the timing and length of board meetings,
the form and distribution of board papers, the minutes etc.
Any attempt to understand the role of the Company Secretary in this
process therefore requires an understanding of two fundamentally related
The Company Secretary role should not be restricted merely to
conformance evaluation, the Company Secretary should also work actively to
generate continuous improvement in board performance.
board’s key role is to ensure that corporate management is continuously and
effectively striving for above-average performance, taking account of risk. This
is not to deny the board’s additional role with respect to shareholder
GETTING STARTED - BOARD
When boards have defined their role, responsibilities and requirements,
the criteria for measuring performance are in place. In support of the
evaluation process consider the following steps:
Meet with the Governance/Executive Committee to discuss specific needs
Meet with the full board to explain processes, purpose, framework and
instruments, time line and feedback
Distribute instruments with date for return
Instruments are returned confidentially to the Company Secretary for
summary and evaluation. Those completing any developed questionnaire should not
sign or place their name on the forms.
Summarised results are reported to the Governance/Executive Committee
The results are reviewed and development processes are put in place by
The completed process should be reviewed with the Governance/Executive
Committee for revision and improvement for future evaluations
Board disclosure of process to shareholders
used in this section can be used to as a starting point to gain an insight into
how well a board meets its objectives. It is not intended to be an exhaustive
list of evaluation criteria, but rather to be a guideline for the development of
appropriate evaluation for the organisation, modified to reflect the unique
functions and roles of each particular board.
· Board members should devote significant time and serious thought to the company’s longer-term objectives and to the strategic options available to achieve them. These too should be put in writing.
· The board has defined and communicated to management the scope, powers, roles and division of responsibilities to be adhered to by management and by the board, in meeting both routine and exceptional circumstances
criteria can be added from research on best practice of other boards of directors.
With the implementation of an ongoing process, boards will be able to create
objectives for improvement, add those to the process, and be able to evaluate
how well those are achieved.
contains similar frameworks which should be implemented at the same time as this
process. The frameworks deal
specifically with individual board members. Using them will give insight into
the abilities of each director. They cover the issues of:
Appendix II is a Directors’ Peer Evaluation Form which
will provide helpful developmental feedback for the director being evaluated
and/or help the chairperson understand the true contribution made to the success
of the board by the individual by:
Leading and Task Accomplishment
And any comments the Director would like to add concerning other areas
of group performance or an individual’s overall contribution to the group
Maximum performance will only be achieved by those companies that are
able to trust their people to make sound decisions within a condensed
time-frame. Such people will need to exercise considerable autonomy whilst at
the same time ensuring that risks are minimised. There was a time when business
practice considered that risks could be controlled through the application of
detailed rules, regulations and compliance regimes. This approach can be highly
unstable and relatively costly. Things move too fast and are too ambiguous for
the old command and control model to work. Instead, prudent boards and managers
need to evolve a corporate culture in which decisions are based on the
application of general values and principles rather than prescriptive rules and
Therefore the challenge for companies is to create an environment in
which its people feel that the values and principles at work within the company
are real. Proper concern with the ethical environment of a company is essential
to long-term business success.
companies pursue a cluster of objectives, of which making money is only one –
and not necessarily the primary one. Yes, they seek profits, but they are
equally guided by a core ideology – core values and a sense of purpose beyond
just making money. Yet, paradoxically, the visionary companies make more money
than the purely profit-driven comparison companies.5
Any organisation capable of managing the complexities of paying proper
attention to the way in which values are expressed in practice will be well
equipped to cope with the complexity that defines the business world that they
Working at the Chairman’s right hand, the Company Secretary will be
more than just an amanuensis, he or she will be a trusted professional advisor,
possessed of sound, independent judgement, part of the management team and yet,
Every Chairman needs a confidante who can act as a sounding board when
tough decisions must be made and executed. This will mean that there are
occasions when the Company Secretary may need to adopt a position of
disinterested advice that goes beyond that of setting out the formal
requirements of the law.
Chartered Company Secretaries are bound to adopt this role because of
their chosen status as professionals. Belonging to the profession of Chartered
Secretaries means that members must always act according to the Code of Ethics
[refer Appendix III] and there is a significant and sometimes overriding duty to
act in a spirit of public service. The determination to act in this spirit is
the key defining characteristic of a professional. Company Secretaries must not
suspend their judgement in deference to those who hold or exercise power or
influence. The critical assessment by a Company Secretary should bolster a more
general tradition in which professionals provide impartial advice and service,
consistent with the more general professional obligation of discerning between a
clients interests and wants. This is best practice. Not concentrating on
quasi-technical frameworks in which measurable standards are defined.
Company Secretaries play a vital and creative role in assisting their
organisation. The world is becoming a more complicated place for companies to
operate in, and when directors feel uncomfortable with emerging paradigms of
corporate governance, where else, in the company, is professional assistance to
be found but from the Company Secretary.
APPENDIX I: DIRECTORS’ ASSESSMENT FORM:
Director being evaluated:______________________________
This framework can be used to gain an insight into the ability of each
director on the board. It is not intended as an exhaustive list of evaluation
criteria, but rather a guideline for the development of appropriate evaluation
of the organisation.
These questions can be answered by considering both the absolute
standard of the defined role and functions of the board, and the relative
standard of other available talent.
APPENDIX II: DIRECTORS’
PEER EVALUATION FORM
completing any questionnaire should not sign or place their name on the form.
Comments on Effort/Participation
Here you should address issues such as whether or not you consider
he/she was an active and enthusiastic participant in board activities; exceeded
or fell short of expectations in completing assigned tasks; appeared to be well
prepared for board or committee meeting; etc.
space should be allowed under each heading for the director to give a full
on Organising/Leading Task Accomplishment
Here you should consider issues such as whether or not he/she tended to
clear up, or add to, confusion; got meetings back on track, or further derailed
them; proposed goals; defined problems and suggested procedures; pulled together
related items and offered conclusions for the meeting to consider; worked to get
board and committee tasks organised; etc.
on Intellectual/Creative Contribution
Here you should consider issues such as whether or not he/she
contributed intellectually sound thinking; failed to accept good thinking of
others; offered creative solutions and ideas; developed own and others’ ideas
into a logical framework; coached and helped others in his/her areas of special
on Team Skills
Here you should consider areas such as whether or not he/she became
defensive or withdrawn if his/her ideas were challenged or not accepted;
encouraged, acknowledged and supported others’ contributions; listened
carefully to others and considered their ideas; excessively dominated discussion
so as to prevent potentially fruitful contributions by others; reconciled
disagreements; encouraged colleagues to explore their differences; etc.
comments you would like to add concerning other areas of group performance or
the individual’s overall contribution to the group.
INSTITUTE CODE OF PROFESSIONAL ETHICS AND CONDUCT
The Institute requires its members to observe the highest standard of
professional conduct and the ethical behaviour in all activities. By maintaining
this standard, members enhance their own standing as corporate managers and
increase public confidence in the management and administration of companies or
As the conduct of an individual member can reflect on the wider
profession of corporate management and upon the Institute’s membership as a
whole, the code sets out what are deemed to be appropriate standards of
Adherence to The Code
Members acknowledge that this code is to be adhered to both in spirit
and to the letter, so that members’ conduct is governed by the highest
standards of professionalism and ethical behaviour.
This code was adopted by the New Zealand board of the Institute at their
meeting on 15 July 1996.
For a fuller account of the powers and duties of the company secretary refer
to Chartered Secretaries New Zealand Inc. booklet Powers
And Duties Of The Company Secretary , 2003
Hilmer, F. (1994) Strictly Boardroom,
Sydney, The Sydney Institute p.33
First developed from the NACD Blue Ribbon Commission Report,
Performance Evaluation of CEO’s, Boards, and Directors, NACD,
Washington, 1994, Parker, H. Letters to a New Chairman, 1979. From Demb, A. and Neubauer, F. The
Corporate Board: Confronting the Paradoxes, Oxford University Press,
1992 and Salmon, W.J. 'Crisis Prevention: How to gear up your Board', Harvard
Business Review. Jan-Feb 1993 by Bowes, G in Board Performance And
Evaluation presented at The Tenth Annual Company Secretaries & Corporate
Managers Conference March 1995.
Collins, J. & Porris, J. (1994), Built to last: Successful Habits of Visionary Companies, Stanford,
University of Stanford Press p.8
*6* First developed from the NACD Blue Ribbon Commission Report, Performance Evaluation of CEO’s, Boards, and Directors, NACD, Washington, 1994, Parker, H. Letters to a New Chairman, 1979. From Demb, A. and Neubauer, F. The Corporate Board: Confronting the Paradoxes, Oxford University Press, 1992 and Salmon, W.J. Crisis Prevention: How to gear up your Board, Harvard Business Review. Jan-Feb 1993 by Bowes, G in Board performance And Evaluation presented at The Tenth Annual Company Secretaries & Corporate Managers Conference March 1995.