Corporate secretaries and the power of being a positive gatekeeper
Positive Gatekeeper. I can’t think of a better name for corporate secretaries that help their companies understand and manage the sustainability risks and opportunities their organizations face. Thomas Niemann, Ford Motor Company’s global social sustainability manager, coined the phrase during a recent discussion I hosted for the Society of Corporate Governance, entitled “The Role of the Corporate Secretary in Sustainability.”
The idea is straightforward, but crucial. The most effective corporate secretaries are those who act as a filter for the critical sustainability issues that should be raised to the board, but who also apply the filter with a strategic lens. Niemann explained that the corporate secretary helps his group most by having a thorough understanding of critical issues that affect the enterprise. This way, when those managers bring a sustainability issue to the corporate secretary, the corporate secretary is able to make the assessment about when the issue needs board attention.
It’s a balancing act based on a new kind of expertise. Sustainability is a broad term – and someone in Niemann’s role deals with a range of environmental and social issues that affect the organization. However, not all these issues belong at the board level. The most effective corporate secretary plays the role of sifting though the range of issues with a materiality lens – and determining what makes sense to elevate to the board level.
This task is becoming more crucial. Increasingly, corporate secretaries are expected to be more involved in their companies' sustainability functions. That’s a direct result of the evolution in the understanding of the impact that sustainability challenges, including climate change, water scarcity, and a low carbon economy, could pose to the corporate bottom line. Consider that:
- Studies from groups like Morgan Stanley, Deutsche Bank and Harvard Business School underline that high performing sustainability companies outperform their peers on a range of financial metrics.
- The ratification of the Paris climate agreement means that companies, especially those operating on a global level, will likely need to contend with growing regulations addressing issues like climate change.
- Investors are putting pressure on companies to address these issues proactively. During the 2016 proxy season, over 400 shareholder resolutions on climate change and other sustainability issues were filed.
So what can corporate secretaries do? On the webinar, we discussed a number of key steps to take to manage this growing responsibility:
1. Understand what sustainability means to your company.
Sustainability will mean different things to different companies and organizations develop a variety of organizational structures for tackling their specific sustainability challenges and opportunities. Whatever organizational approach a company takes, at Ceres we believe sustainability shouldn’t be considered separately or a silo, but should be integrated with corporate economic or financial performance. Every company needs to understand how they can address sustainability in the most strategic way. By monitoring all of the work and conversations (or noticing the lack of them) happening within your company around sustainability, corporate secretaries can bring the right issues to the board’s attention.
2. Understand the evolving context for sustainability.
The sustainability environment is rapidly changing. But what’s certain is the rising importance of sustainability to different groups, including markets, employees, investors and global regulators. Investors, for instance, are scrutinizing the board more closely. Peggy Foran, director at Occidental Petroleum Corporation and chief governance office, vice president and corporate secretary at Prudential Financial, said during the webinar that during the past five years, her board has heard from large investors more on environmental and sustainability issues than other issues because of their growing importance to these shareholders. Practically, a concrete way to track and keep the board up to date on this changing context among shareholders is to talk regularly with the sustainability and investor relations departments, said Stephanie Tang, senior corporate counsel and assistant corporate secretary at the Clorox Company, during the webinar.
3. Engage with internal and external stakeholders.
By partnering with areas of the company involved in sustainability activities, such as operations, human relations or communications, corporate secretaries can cultivate their understanding of their organizations key sustainability. Foran pointed out that externally, the corporate secretaries see first hand the key trends impacting not just their own company and industry, but more broadly. Corporate secretaries have a unique ability to help provide a balanced perspective that finds common ground among various constituencies and that will inform board discussions.
4. Think through when issues need to be elevated to the board level.
Corporate secretaries can use the insight they’ve gathered from internal and external engagement to educate senior management and the board on key trends and to communicate with them in a way that’s helpful and protective of their corporation. As Tang explained, as the corporate secretary, you see all of the discussions going on in the board room and you know what risks and trends the board is thinking about. That puts you in a great position to bring sustainability related issues relating to those strategies and business decisions to the board’s attention. You’re also aware of what’s not top of mind for the board that should be raised for them, based on your work with your company’s sustainability group, IR group, and stockholder engagement efforts on the corporate governance side.