Joining the top table

As a survey shows top salaries exceeding 200,000, the company secretary's role is becoming increasingly important - with lawyers offered a route to the board, writes Stephen Ward

The word 'chairman' sounds important, 'chief executive' sounds dynamic, while to an outsider 'company secretary' evokes a dull, Dickensian clerk.But as Peter Hammonds, a former company secretary who is on the professional services team at the Institute of Directors, explains: 'You don't see the traditional white-haired man in half-moon spectacles with bundles of old ledgers any more.' And although the 19th century name continues unchanged into the 21st, the role of the company secretary has been growing more dynamic for a decade, as Stock Exchange rules and company law have become ever more complex.

Company secretaries need not be lawyers, even though they often are.

But there is more need now for a legal qualification.

Jon Moores, a consultant with CSS - the company secretary arm of recruitment firm Beament Leslie Thomas - says most FTSE 100 company secretaries are now commercial lawyers.

One reason, of course, is that the board already probably has an accountant in the person of the finance director, so it needs legal expertise more than it needs a second accountant.Alvin Shuttleworth, company secretary and group legal director of BNFL, says the role of company secretary has grown primarily because of corporate governance - a growing tide of best practice for running a company, which has helped prevent a repetition of scandals such as the Maxwell pension funds affair.

Such scandals were taken to show that by the 1980s, gentlemanly codes of behaviour were no longer a sufficient guarantee of honesty.

They were also a reaction to outrage at so-called 'fat cat' salaries and vast golden handshakes voted by directors in the same era.Successive commissions on corporate governance - Cadbury, Greenbury, Hampel and last year Turnbull - have between them provided reams of best practice for boardroom behaviour, pay and disclosure and have become the basis for the Stock Exchange rules.

The Takeover Panel has its own blue book of regulations.

It falls to the company secretary to make sure all these are followed.

There is a further wave of regulation under consultation for next Spring and a thorough reform of company law for the next Parliament.

They mean more rather than less regulation for companies and boards, and an even greater need for a legal mind to look after implementing them.

Edward Smethurst, a former chairman of the Law Society's Commerce and Industry group, says there is a further factor behind the rise of the lawyer as company secretary.

It is the same factor which has seen the number of in-house lawyers double in five years: 'It is the need for legal risk management.

People are becoming more litigious.'Also, a company secretary will often hire the company's external solicitors.

'Whereas in the past an accountant would have been able to do that, there is now so much litigation that the legal budgets run into millions of pounds a year,' he says.

A solicitor is better placed to manage them, he says.

So the company secretary's post is becoming more the prerogative of the solicitor, and is often combined - like Mr Shuttleworth's - with the job of heading the legal department.

By law, the company secretary of a Stock Exchange-listed company must be a trained solicitor, barrister, accountant or a chartered secretary - a qualification awarded to administrators after several years of study and exams in, among other things, law and accountancy.

For smaller companies, the job can legally be filled by anyone.

In practice, says Mr Hammonds, president of the Institute of Chartered Secretaries, the smaller the firm, the less likely it is to go to a lawyer.

This is because the duties are less onerous in private companies, and smaller firms will need the company secretary to do other things as well.

Solicitors will get a look-in only in the very small company, which might appoint them to do the job as part of their fee-earning duties, rather than as a full-time member of the company.

Nathalie Schwarz, head of legal and company secretary at the UK's leading radio group and FTSE 250 company Capital Radio, says: 'In large companies, the culture of the company secretary has moved on from being just watchdog or backstop to the board.

There is now a wider legal role as well.' Mr Hammonds, for nine years company secretary of NatWest Bank, agrees: 'The company secretary should be a facilitator for the board, and not stop them doing things, but find ways to do them appropriately, in accordance with the regulations.'This applies whatever their background and training, but as more and more lawyers are becoming company secretary, their change in culture parallels the trend for solicitors to become much more than technical advisers.

Although checking safeguards are followed when all around are pursuing a deal hell for leather is still perhaps the most important part of the company secretary's role, there is now far more to it.

Ms Schwarz says the impression that lawyers are not businesslike is changing.

'The pressures of being a commercial lawyer nowadays means you have to be businesslike.

So now lawyers who are company secretaries are much more "can do", rather than "mustn't do".

There is more room for creative and lateral thinking.' There is one fund manager known for targeting companies with poor corporate governance, buying a decent stake, and then using the influence this brings to introduce better corporate governance.

And it does not do this for the good of the corporate world: it has a real and positive effect on the business and its profitability.

So, solicitors take a more active role.

Mr Smethurst says: 'Lawyers never just sit there like mutes.' Mr Shuttleworth agrees: 'I am there to advise on procedure, but I do get involved in fuller discussions on occasions.'For this is perhaps the key attraction of the company secretary role - the place on or around the board.

It is still the case in many companies that the head of legal is seen as a support role, not worthy of a place on or near the board however much use it may be to have the lawyer around in practice.

But as company secretary, there is far greater access to strategic issues that the person who is just head of legal.

Mr Shuttleworth describes the way he is becoming more pro-active.

He is on the BNFL executive management team as well as the main board, which means he gets early warning of potential pitfalls.He says: 'I can see legal issues coming through and advise on them.

If I were just legal adviser, I wouldn't necessarily be involved in discussions and see problems as early as I do.

It means I can be pro-active.'He explains: 'If you see a transaction coming up and you know something in, for example, competition law won't allow you to follow that route, you can say at an early stage that it's not a good idea, and that prevents a lot of failure costs.' Thus all the careers for in-house lawyers are developing an extra dimension.

Money is only part of the story.

A recent survey by CSS found company secretaries at FTSE 100 companies earned between 91,000 and 173,000, with those more heavily involved in main board decision-making earning more than 200,000 (see [2000] Gazette, 16 November, 5).FTSE 250 companies, with fewer lawyer-company secretaries, pay between 65,000 and 102,000.

While many assistants, as well as partners, earn more than that in City private practice, the career choice for the ambitious solicitor is growing less clear-cut.Mr Smethurst, who at 32 has just moved to become company secretary of Ultraframe, a FTSE 250 building materials group, says it is crucial for the sector that the company secretary route can lead to a main PLC board seat.'That brings the possibility of share options, and potentially a career in wider business on PLC boards,' he says.

He gives the example of Bob Ayling, who before his demise earlier this year had risen from in-house lawyer at BA to company secretary, then chief executive.

And there are others, such as David Burns, who joined Airtours as its first in-house lawyer.

He became company secretary, then headed one of its divisions before leaving recently to become chief executive of the Football League.'There is no ceiling any more,' Mr Smethurst says.

That is important for in-house legal departments seeking to attract and retain the best solicitors.

'Otherwise, if you are in your thirties and you look at your contemporaries becoming equity partners, you would be more likely to be tempted back into private practice.'Stephen Ward is a freelance journalist