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Sep 24, 2014

Concerns about combining the GC and corporate secretary roles

Separation of roles gives corporate secretaries more room to fufill the expanded functions of chief governance officer, but GCs' access to the boardroom is an issue

In early September, I posted a query on the Society of Corporate Secretaries and Governance Professionals’ online discussion board, the Society Huddle, regarding concerns about potential conflicts of interest in combining the roles of general counsel and corporate secretary. The responses have been illuminating – and by no means conclusive.
All but one of the eight respondents commented on the Huddle with no apparent reservation about identifying themselves to fellow society members. As this website is also visited by non-members, however, I won’t identify any respondents here.
The question was raised in a post on the International Bar Association’s website by Dina Medland, who cites a recent study by the Institute of Chartered Secretaries and Administrators and the Henley Business School, both UK-based. That study distinguishes between GCs who are involved in running the business and ‘are the chief executive’s right hand’ and secretaries who ‘should be the chairman’s right hand’. Medland also raises the issue of a GC having to split his or her attention in board meetings between listening for legal risks and taking minutes. Another concern is whether the dual role might create confusion about the professional ethics and responsibilities owed by lawyers to their clients – that is, attorney-client privilege. 

One respondent says that although virtually all GCs in the US are on the company's executive leadership team and participate in business decisions and strategic planning, this doesn’t prevent them from also serving as corporate secretary. That’s because the latter role ‘serves the entire board of directors, not simply the chairman, and the general counsel's duties in no way conflict with that role.’

As for attorney-client privilege, he points out that many secretaries are also lawyers and subject to the same ethical obligations. ‘Even when a corporate secretary is not a lawyer, he or she is undoubtedly subject to a code of conduct that makes it clear he or she owes a duty of loyalty to the corporation – not the CEO or the general counsel,’ he adds.     
A second respondent says the dual role ‘creates a question as to whether communications between the board and/or management and the person performing both roles are legal advice subject to the attorney-client privilege or general corporate governance/business advice, which is not subject to the privilege.’ Consequently, he cites ‘a strong possibility that a privilege fight might evolve in any potential future litigation in which those communications will become the subject of discovery.’ Separating the two roles to clarify which communications are privileged and which aren’t is one way to avoid such risk, he says. He also says separation of the secretary’s role and that of the GC or other corporate officers ‘provides the corporate secretary with the latitude to robustly perform the increasingly important, demanding and expanded nature of the chief governance officer role.’

Perhaps a bigger concern of a higher order is something mentioned by a third respondent, a former in-house lawyer who replies more privately by email, sharing some comments made at a society roundtable she attended a few years back.
‘As one GC put it, most GCs fight tooth and nail to be secretary, because it’s the only way to ensure they’re invited to the [board] meeting,’ she reports. ‘As GC, particularly if they focus on legal risk, the CEO may not want them present.’
Excluding a GC from board discussions because he or she may focus on legal risk surely cannot be considered a best governance practice. But if that’s a prevalent concern, maybe it’s best to combine the GC and corporate secretary roles for the present.

David Bogoslaw

Associate Editor and Online features producer for Corporate Secretary