Role of Company secretary in State-Owned Enterprises & PSUs

Introduction

The role of company secretaries in state-owned enterprises (SOEs) and public sector undertakings (PSUs) has undergone a significant transformation in recent decades, evolving from a primarily administrative function to a pivotal position at the intersection of governance, compliance, and strategic management. This evolution reflects the changing landscape of public sector organizations and the increasing emphasis on transparency, accountability, and efficiency in government-owned entities worldwide.

SOEs and PSUs play a crucial role in many national economies, often operating in strategic sectors such as energy, transportation, and telecommunications. According to the World Bank, SOEs account for 20% of investment, 5% of employment, and up to 40% of domestic output in countries around the world. Given their significant economic impact and the public resources they manage, these organizations face unique challenges in balancing commercial objectives with public service mandates.

In this complex environment, the company secretary emerges as a key figure, tasked with navigating the intricate web of regulatory requirements, stakeholder expectations, and governance best practices. The International Corporate Governance Network (ICGN) emphasizes that “the company secretary plays a crucial role in supporting the board and helping to ensure that it functions effectively”. This role has become increasingly critical as SOEs and PSUs face growing scrutiny from governments, citizens, and international organizations.

The importance of effective governance in SOEs is underscored by research from the Organisation for Economic Co-operation and Development (OECD), which found that well-governed SOEs can contribute significantly to economic efficiency and competitiveness. Company secretaries are at the forefront of implementing these governance frameworks, serving as advisors to the board, liaisons with stakeholders, and guardians of corporate integrity.

Moreover, the global trend towards greater corporatization of public sector entities has further elevated the role of company secretaries. As SOEs adopt more corporate-like structures and practices, the demand for professionals who can bridge the gap between public sector mandates and private sector efficiencies has grown. A study by PwC noted that 69% of SOEs globally have implemented significant governance reforms in recent years, with many of these changes directly impacting the responsibilities of company secretaries.

This article delves into the multifaceted role of company secretaries in SOEs and PSUs, exploring their key responsibilities, the challenges they face, and their growing importance in shaping the future of public sector governance. By examining current trends, statistical data, and case studies from various countries, we aim to provide a comprehensive overview of how company secretaries contribute to the effective management and oversight of these vital economic entities.

Key Responsibilities

Corporate Governance

Company secretaries in SOEs and PSUs play a vital role in implementing and maintaining sound corporate governance practices. Their responsibilities include:

1. Ensuring compliance with government regulations and policies

2. Scheduling and facilitating board meetings

3. Preparing meeting agendas and maintaining accurate minutes

4. Advising the board on governance matters and best practices

The importance of corporate governance in SOEs has grown significantly, as evidenced by the increasing number of SOEs in the global economy. According to the OECD, the number of SOEs in the top 500 global companies by revenue quadrupled from 34 in 2000 to 126 in 2023, representing 12% of global market capitalization1.

Legal Compliance

One of the primary duties of a company secretary in SOEs and PSUs is to ensure legal compliance. This includes:

1. Filing statutory returns and maintaining company records

2. Keeping directors informed of their legal responsibilities

3. Monitoring changes in relevant legislation and regulations

4. Ensuring compliance with the Companies Act and other applicable laws

In many countries, the role of the company secretary is mandated by law. For example, in Ireland, all companies registered under the Companies Act 2014 are required to appoint a company secretary, who may also be a company director5.

Communication and Reporting

Company secretaries act as a bridge between the board, shareholders, and government agencies. Their responsibilities in this area include:

1. Preparing and disseminating annual reports and financial statements

2. Facilitating communication between the board and various stakeholders

3. Ensuring transparency in reporting and disclosure of information

In the United States, corporate secretaries are often responsible for shareholder engagement on governance issues and compliance with federal and state governance laws5.

Challenges and Opportunities

Company secretaries in SOEs and PSUs face unique challenges due to the public nature of these organizations and their accountability to government stakeholders. Some of these challenges include:

• Balancing commercial interests with public service objectives
• Navigating complex regulatory environments
• Managing political influences and government interventions
• Ensuring transparency while maintaining confidentiality

Despite these challenges, the role of company secretary in SOEs and PSUs offers significant opportunities for professionals to contribute to public sector governance and efficiency.

Statistics and Research

Recent research and statistics highlight the growing importance of company secretaries in public sector governance:

1. The World Bank estimates that SOEs account for 20% of investment, 5% of employment, and up to 40% of domestic output in countries around the world6.

2. In 2023, SOEs had USD 53.5 trillion in assets and over USD 12 trillion in revenue globally3.

3. A study in Brazil found that federal SOEs that adopted a monitoring mechanism known as IG-SEST significantly increased their profitability compared to similar municipal and state SOEs2.

4. In China, every listed company is required to have a board secretary, who is considered part of the senior management team5.

5. The role of corporate secretaries in North American public companies has evolved, with many now serving as their corporation’s general counsel5.

Evolving Role and Importance

The role of company secretaries in State-Owned Enterprises (SOEs) and Public Sector Undertakings (PSUs) has indeed evolved significantly, expanding far beyond traditional administrative duties. Today, these professionals are increasingly recognized as key players in corporate governance, with their responsibilities and influence growing in several important ways:

Strategic Governance Leadership

Company secretaries are now taking a more proactive role in shaping governance practices within their organizations. They are no longer simply implementing policies but are actively involved in developing and enhancing governance frameworks3. This shift reflects the growing complexity of regulatory environments and the increased focus on corporate accountability.

Elevation to Chief Governance Officer

In recognition of their expanded responsibilities, many organizations are formalizing the company secretary’s role with titles such as Chief Governance Officer (CGO)28. This elevation signifies the strategic importance of the position and acknowledges the company secretary’s critical role in ensuring effective corporate governance.

The CGO typically reports directly to the Board Chair or appropriate Committee Chair on governance matters, while maintaining a functional reporting line to the CEO or Chief Legal Officer for day-to-day operations5. This dual reporting structure underscores the position’s unique blend of strategic and operational responsibilities.

Comprehensive Governance Advisors

Modern company secretaries are expected to provide comprehensive guidance on corporate governance matters, particularly in publicly traded companies3. Their role has evolved to include:

• Advising the board on compliance and governance issues
• Monitoring and interpreting regulatory changes
• Ensuring transparency in corporate communications
• Facilitating effective decision-making processes

Digital Transformation Leaders

In the current era of rapid technological advancement, company secretaries are increasingly playing a crucial role in driving digital transformation within their organizations1. They are leveraging tools such as automated compliance systems to enhance governance and risk management practices. This technological leadership is essential for keeping SOEs and PSUs competitive and efficient in a rapidly evolving business landscape.

Risk Management and Strategic Planning

The global COVID-19 pandemic highlighted the need for enhanced risk management in organizations. Company secretaries are now expected to play a key role in evaluating potential risks and ensuring that companies have robust, realistic risk processes in place1. This expanded responsibility extends to strategic planning, where company secretaries provide valuable insights based on their unique, holistic view of the organization6.

Expertise and Qualifications

The increasing complexity of the role has led to higher expectations regarding the expertise and qualifications of company secretaries. Many jurisdictions now mandate specific qualifications for these positions, recognizing the critical nature of their responsibilities3. This professionalization of the role ensures that company secretaries are well-equipped to handle the diverse challenges they face in modern SOEs and PSUs.

Facilitators of Board Effectiveness

Company secretaries are evolving from administrators to facilitators and enablers of critical board processes7. They are responsible for ensuring that boards maintain multiple perspectives or “lines of sight,” including:

• Oversight of organizational performance
• Insight into potential issues and opportunities
• Foresight in strategic planning
• Hindsight to learn from past experiences

By facilitating these diverse perspectives, company secretaries play a crucial role in enhancing board effectiveness and strategic decision-making.

In conclusion, the evolving role of company secretaries in SOEs and PSUs reflects a broader trend towards more sophisticated, strategic approaches to corporate governance. As these organizations continue to face complex challenges and increased scrutiny, the importance of skilled, proactive company secretaries is likely to grow even further, cementing their position as key players in organizational success and public sector governance.

Conclusion

The role of company secretary in state-owned enterprises and public sector undertakings has become increasingly complex and critical for ensuring good governance, legal compliance, and effective communication. As SOEs continue to play a significant role in national economies, representing 12% of global market capitalization1, the importance of skilled company secretaries in navigating the unique challenges of the public sector is likely to grow further.

By upholding high standards of corporate governance and facilitating transparent communication, company secretaries contribute significantly to the efficiency, accountability, and performance of SOEs and PSUs. Their evolving role reflects the growing emphasis on corporate governance in the public sector and highlights the need for continued professional development and recognition of this crucial position.

Citations:

1. https://www.oecd.org/en/topics/sub-issues/corporate-governance-of-state-owned-enterprises.html

2. https://publications.iadb.org/en/monitoring-governance-state-owned-enterprises-assessing-impact-brazilian-corporate-governance

3. https://www.oecd.org/en/publications/ownership-and-governance-of-state-owned-enterprises-2024_395c9956-en.html

4. https://documents.worldbank.org/en/publication/documents-reports/documentdetail/523421534424982014/effects-of-corporate-governance-on-the-performance-of-state-owned-enterprises

5. https://en.wikipedia.org/wiki/Company_secretary

6. https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099748312052236078/IDU0bd626a2f03d16045e708aa20159c6bc4b737

7. https://www.dilitrust.com/corporate-secretaries-key-governance-players/

8. https://www.imf.org/-/media/Files/Publications/fiscal-monitor/2020/April/English/ch3.ashx

9. https://www.ualberta.ca/en/china-institute/media-library/media-gallery/research/policy-papers/soepaper1-2018.pdf

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Disclaimer:The views and information presented in this article are based on available research and data as of the knowledge cutoff date. Readers should consult current sources for the most accurate and jurisdiction-specific information. The author assumes no liability for any decisions made based on this content.