Corporate secretaries' leaders on information flow
The present-day corporate secretary function is a product of downsizing in the 1980s and the growth of a corporate governance cottage industry in the 1990s. That's according to the American Society of Corporate Secretaries' outgoing chairperson Carol Strickland. As corporate secretary for US Trust Corporation since 1979, Strickland has first-hand experience of a lot of those changes.
'The retrenchment of corporate America means that everyone is doing more with less. The public focus on the board's strategic role also means directors have to keep abreast of a far wider range of issues than they used to. As their eyes and ears, we have to be able to identify the really important developments for them,' Strickland explains.
According to Strickland, the American Society of Corporate Secretaries has played an important part in helping corporate secretaries adapt to the growing demands of their role. 'The ASCS used to be thought of as a stodgy, slow-moving group but it has had to change because its members need it. Through traditional methods like conferences and meetings, and more up-to-date modes of communication like our web site and teleconferencing services, the Society keeps members informed of all the key governance concerns of the day to help them do their job properly,' Strickland says.
Since joining US Trust some 22 years ago, Strickland has seen the company grow from a one-office trust company with banking powers to a national wealth management company with branches all over the States. According to Strickland, though, US Trust is still a bit of an anomaly: although legally a commercial bank, its bread and butter comes from investment management. 'We've been organizing the financial needs of affluent people since the 1850s so we're better at it than any other institution,' she claims. This emphasis was strengthened in 1995 when US Trust spun off its securities processing businesses to Chase Manhattan in order to focus on investment management.
US Trust also stands out for having a high degree of employee stock ownership with over 30 percent of its stock held by its personnel. 'We started on that bandwagon in 1980 when there was very little ownership among our board and officers. We wanted to change that, to get our people really thinking like owners,' Strickland says.
The incoming ASCS chair, Karl Barnickol, also has experience of handling a spin-off. He'd been working for pharmaceutical company Monsanto for 26 years when, in 1997, it spun off its chemical division and formed a new company, Solutia. As general counsel and secretary for Solutia, Barnickol presides over 14 other lawyers.
'With a spin-off company, you have the luxury of looking at a corporate governance structure from scratch,' notes Barnickol. 'Existing companies always have various elements that exist for no real reason; in spin-offs you get the chance to clear away all that historical baggage.'
From the outset, Barnickol has been talking with Solutia's chairman and governance committee about how to design a structure that really works for the company rather than swallowing Monsanto's whole. The new company has a much smaller board than Monsanto - ten directors, eight outside and two from management - and only three committees: compensation, governance and audit & finance. Initially, the main function of the governance committee was to get the company's governance structure up and running but it now acts as a nominating and social responsibility committee as well.
In contrast, US Trust still has a relatively large board of 18 directors, with four of them insiders. 'We know that's going against the trend, both in terms of its size and the number of employee directors,' says Strickland. 'But that was a well thought-out decision rather than just an inherited structure. We strongly believe that one size doesn't fit all but we do take notice of what the governance pundits have to say.'
When Calpers and the Business Roundtable came up with their recommendations last year, for example, US Trust was prompted into an audit of its governance procedures. While the board didn't go so far as to adopt a written policy, directors did examine how the board operated, looking particularly at their definition of an independent director. They concluded that the company was very comfortable with the structure it already had in place.
Barnickol adds that the structure of the board meetings themselves is a very important issue at Solutia. 'Even before the spin-off, the chairman and I sat down to discuss and map out how the meetings should function. We decided that we should have fewer but longer meetings. We reckoned it would be easier to engage the board and get the benefit of our directors' backgrounds if they spent more extended periods looking at strategic issues rather than, say, monthly meetings where they might tend to go through topics on a cursory basis.'
Solutia now has six one-and-a-half day meetings a year. Typically they start with a committee meeting after lunch on the first day, moving on to a working dinner to discuss conceptual topics, with meetings the next morning going on through lunch. 'We think it gives directors time to really connect with each other,' says Barnickol.
Over the year that Strickland has been chair, the ASCS has put in place a number of new initiatives. For instance, it has established a relationship with the New York Stock Exchange to give its newly-listed companies complementary annual membership to the ASCS. It has also designed a proxy process form for members, laying out proxy fees and discussing issues surrounding the process like the use of technology in the delivery of proxy materials, and the implications of 'just say no' campaigns by institutional investors.
'Most importantly, perhaps, we've tried to look at the best ways of continuing to give our members more timely information,' says Strickland. 'The internet has been particularly useful in catering to a wide range of secretaries in different situations; we've established chat groups for people in different industries and for those in different parts of the life cycle of their company,' she adds.
This year the society has also started holding teleconferences. These include conference calls between the presidents of the society's regional chapters as well as open calls for the benefit of all its members. Earlier in the year it staged a teleconference on what companies are doing to prepare themselves for the year 2000 problem with experts talking about disclosure and technological implications. According to Strickland, over 1,000 people listened in to that call.
The communication theme will be explored further at the ASCS's annual conference this month with panels on shareholder communication, crisis communication and communication issues arising from the year 2000 problem. 'Essentially it's what the corporate secretary's role is all about,' explains Strickland. 'At the society, we're constantly looking for new ways of improving communication channels for members but, at the same time, we don't want to overload them with information either. An important part of the corporate secretary's job is to sift out what's important; information for information's sake makes that task impossible.'
In an ideal scenario, by Strickland's definition, the ASCS should act as a corporate secretary for the corporate secretary. With the increasing emphasis on governance in corporate America, and the continuing squeeze on resources, that's a difficult job to do, however, and being chair is something of a juggling act. Carol Strickland, for one, is ready to hand on the baton. 'It's been a real honor and a privilege but its time for some fresh blood and fresh thinking,' she says.
For Karl Barnickol, his time in the spotlight is just beginning, although as chair-elect he has been shadowing Strickland in the role for the past year. Barnickol seems unfazed by the challenges which may lie ahead of him. He has two main objectives: to improve communication channels between the local and national levels of the organization and to build on the society's advocacy role.
'Over the last few years, the society has been quite effective at putting pressure on the SEC on corporate governance issues,' says Barnickol. 'We want to become more recognized publicly as a spokesman for the corporate community on these sorts of matters by increasing our influence among other relevant groups, particularly congressional committees.'