The last year has seen corporate secretaries vault into the headlines: selective disclosure, managed earnings, audit committees, and of course the ongoing corporate governance revolution. You might think, then, that the chairman of the very busy American Society of Corporate Secretaries should have a sedentary day job in some corporate backwater. Not. Both the incoming and outgoing chairpersons of the ASCS can boast of on-the-job experiences during the past year that are about as frenetic as corporate life gets.
Craig Nordlund, the outgoing chairman, participated in Silicon Valley’s largest ever IPO as senior VP, general counsel and secretary of Agilent Technologies, which is Hewlett-Packard’s $2.1 bn, November 1999 spin-off. Meanwhile, Gwenn Carr, the society’s new chairman, is vice president and secretary at Metropolitan Life Insurance Company, which demutualized in the spring to become one of the biggest ever IPOs of any kind.
It’s very appropriate that the society’s leaders should be in the thick of things, for this professional organization is built on exchange of expertise among members. ‘The society has access to thousands of corporate secretaries to pass on the knowledge and the practical insight for how best to structure the governance process for a company, as opposed to just a theoretical approach,’ Carr points out. ‘Corporate secretaries can share some of the best practices from their respective companies, especially for newly public companies or start-ups that really want to start out doing things the right way.’
In fact, Carr already had a wealth of experience when she arrived at MetLife last year. She started her corporate secretary career at American Natural Resources which fell victim to a hostile takeover in 1985, then moved to AT&T in wake of the Baby Bell divestiture. She joined ITT Corp in 1988 as senior counsel, corporate development, and was named secretary in 1990. In that role she saw ITT through its 1995 break-up then went on to ITT Industries. She remarks on the similarity between the newly demutualized MetLife and ITT Industries after the break-up: ‘The culture has to change to reflect the new environment.’
Helping bring MetLife public, she adds, has been enormously challenging and rewarding: ‘I was bringing to a company that’s almost 140 years-old many concepts that it simply has not had to address before. A lot of what I’ve learned here I could share with people at other large companies that might also transform themselves from what are essentially private companies to public companies.’
As for Nordlund, he has helped make Agilent into a role model for the host of high techs and dot-coms that find themselves floating free and in need of good governance. ‘The management team at Agilent was very used to running its core businesses within the Hewlett-Packard structure,’ says the executive. Indeed, he was perhaps the only one with real knowledge of what it means to run a public company. ‘We spent a lot of time talking about governance issues,’ he says. ‘Also, how we wanted to approach analysts, what kinds of information we felt were appropriate and necessary to continue to provide shareholders, and how we wanted the governance structure to be set up.’ The result is a model of good governance, with, for example, just one inside director (the CEO) and a separate non-executive chairman.
Looking back on his tenure as chairman of the ASCS, Nordlund reflects on the society’s four objectives over the past year: enhancing the membership’s role and reputation as corporate governance experts; re-examining the society’s national committee structure; making sure the national office provides continued support for local chapter programs; and improving outreach to Nasdaq Stock Market and American Stock Exchange listed members.
Chief governance officer
That first goal is summed up in the society’s new tag line adopted in 1999, Promoting excellence in corporate governance, as well as the theme of the 2000 national conference: Taking governance to the bottom line.
‘The corporate secretary is in the best position to be the chief corporate governance officer in most companies today,’ Nordlund sums up. ‘Corporate governance certainly does have a strong impact on companies’ bottom lines and preserving shareholder value, and it has been at the forefront of what I’ve been trying to do during my tenure as chairman: making sure our members are provided with the tools they need to be true corporate governance experts.’ That has entailed education and training programs, written materials, and much of the work the society’s various committees have done over the year.
Carr is clearly intent on carrying on the tradition. ‘A number of organizations discuss corporate governance from the shareholder perspective, looking at it from outside the company and theorizing as to what would be the right structure,’ she describes. ‘Corporate secretaries are actually inside the company, and deal on an ongoing, constant basis with senior management and the board. They can look at governance with a sense of the practical considerations, with a focus on that company’s bottom line rather than an agenda sweeping around the globe. The corporate secretary is the logical person inside the company to make a recommendation about that particular company, as opposed to general principles.’
The 2000 conference theme could perhaps be construed as meaning good governance results in good performance. But Carr admits that hasn’t necessarily been proven. ‘I don’t think anyone could demonstrate that a company’s performance will be better because a particular governance model is adopted,’ she says. ‘On the other hand, having an informed, active and engaged board is likely to contribute to a company’s bottom-line performance.’
Nordlund echoes that belief. ‘One of the ways you bring governance to the bottom line is to have a board that is willing and able to hold management accountable for results, and willing to take action if they aren’t bringing in the results. It used to be the board never threw out the CEO except for the most egregious of sins; but boards don’t wait very long now.’
Rather than being a rallying cry, then, the conference theme is meant to provoke discussion. ‘There’s an opportunity to examine which of the issues on the corporate governance agenda could reasonably have an impact on the bottom line,’ Carr adds.
The ASCS will certainly continue to participate in the ongoing discussion over governance structure along with headline issues such as selective disclosure and managed earnings. The society played an active role in the Institutional Investors Forum at Stanford University law school in December 1999, and last month it sponsored Directors’ College at Stanford. Over the last year the ASCS also testified before the blue-ribbon committee on audit committees, providing comment letters and participating in face-to-face discussions with the SEC on that hot topic. Meanwhile, it has just launched its second board practices survey – ‘So we can have best practices collected, outlined and available for other corporate secretaries to review,’ Nordlund explains.
Reaching out
Nordlund remarks that the society, which is still dominated by NYSE-listed companies, has made progress in reaching out to Nasdaq companies, with Nasdaq as well as the NYSE paying a year’s membership for each new listed company. Many of those new members have been retained through initiatives such as a mentoring program, which assigns a senior member to each new one to ensure that they’re invited to meetings and that all their questions are answered.
Still, Nordlund admits that he would have liked more progress in attracting Nasdaq membership, especially since many high techs are in need of good governance practice. ‘The dot-coms in particular tend to have younger, less experienced management,’ he comments. ‘A lot of them have founder syndrome – good ideas but no real experience running a public company. Having an experienced corporate secretary to understand what Wall Street and public shareholders expect in terms of governance structure and board of directors is really key.’
Here, too, Carr is poised to take on the mantle of responsibility. ‘The dot-coms, like a lot of entrepreneurial enterprises, go through different stages of development,’ she explains. ‘They start out with an idea, work at it, get it established, market it, raise money – all as a private company. Then one day that idea takes off, and now they need public financing. That brings in the public shareholders, who have different ideas about how the board and management should structure their relations, and how they should deal with investors. The society has members ranging from very large to very small companies, many of whom have been through the start-up or IPO process, and have had to make that transition from entrepreneurial company to publicly held company – different regulations, reporting scheme, and constituencies that have to be addressed. So the knowledge, experience and sophistication of society members can be shared with others who are new to the process.’
That sums up the sharing attitude of Carr, and indeed the society in general. The wonder is that with around 11 mn shareholders at MetLife clamoring for her attention, she finds the time for the society’s more than 4,000 members.
