Corporate Secretaries And Corporate Governance Professionals The Expanding Role Of The Corporate Secretary In The World Of Nonprofit Organizations

Friday, April 1, 2005 - 01:00

The Editor interviewsJennifer Coffman, Corporate Secretary, American Arbitration Association.

Editor: Ms. Coffman, would you tell our readers something about your professional experience?

Coffman: I began my career with an advertising and public relations firm in 1993. After two years there I joined the American Arbitration Association.

Editor: Please tell us about the position of corporate secretary at the AAA. How has the position evolved during the time you have held it?

Coffman: It has changed a great deal. The original responsibilities of annual meeting coordination and relationship management with the AAA directors continue, but they have grown to include, for example, chairing the organization's Mission, Vision and Values Committee. I serve as Chief Ethics Officer as well and have responsibility for staff ethics training and ethics communications. There are compliance responsibilities, including a variety of corporate filings and the tracking of relevant nonprofit legislation, and the implementation of leading practices in the corporate governance area. The education and training of AAA neutrals and staff also fall under my jurisdiction, and I oversee AAA publications. It is a pretty full agenda.

Editor: The AAA is a nonprofit organization. Does that make any difference to the responsibilities that you carry as corporate secretary?

Coffman: In terms of fiduciary responsibilities, I do not see much difference between nonprofits and for-profits. My colleagues and I are required to act in the best interests and to the benefit of the AAA. I work with the board of directors and the CEO to implement projects and programs that further the AAA mission of education and public service and its vision to be the leader in conflict management. Integrity is a founding core value and at the center of our work. Standards of ethical conduct are guiding principles for any undertaking, and we look to leading practices in managing our operations. In all of these things, I do not believe there is much difference between the nonprofit sector and the world of public, for-profit enterprises or between the executives who lead these different types of organization.

Editor: Corporate governance has changed dramatically over the past ten years. Board involvement in an organization's activities is much more extensive today. Has this been your experience at the AAA?

Coffman: Responsible nonprofits, especially smaller organizations, have always worked closely with their boards and board committees. A small nonprofit with just a few employees leverages its board - which is usually composed of unpaid volunteers - for its management expertise, its financial experience, and its donor connections, as well as personal contributions. While the AAA has more than 700 employees, we work closely with our board in a variety of ways. It is a large board, and it includes people from many different walks of life: corporate executives, ADR academics and law firm partners, union representatives, nonprofit leaders, and a number of former judges. The AAA board is a tremendous resource for the organization, and it serves to keep us focussed on the AAA mission.

Sarbanes-Oxley has changed corporate governance dramatically in setting new standards for publicly-listed companies. In a number of areas the statute has been read to have direct applicability to nonprofits as well, in, for example, prohibiting any retaliation against whistleblowers and prohibiting the destruction of records pertaining to investigations and litigation. Accordingly, nonprofit organizations need to have policies and procedures in place to address these requirements. At the AAA we have recently implemented a new corporate records management program, and we are working with an outside provider on the proper handling of whistleblower calls.

The impact of Sarbanes-Oxley has been felt in a number of state houses, and many state legislatures have established rigorous standards to discourage CPA's providing both audit and consulting services to their clients, for example. Several state attorneys general have proposed nonprofit versions of Sarbanes-Oxley. California recently passed a nonprofit integrity act governing the solicitation of charitable contributions in the state, and at the federal level the Senate Finance Committee has taken up the nonprofit governance issue.

The nonprofit community has been proactive in addressing these governance concerns. Currently, a broad group of nonprofit representatives serve on what is called the Panel of the Nonprofit Sector. This group recently issued a preliminary interim report that recommended enhanced transparency through accurate and timely filing of the annual Form 990, enhanced governance through the recruitment of financially literate directors and the creation of a whistleblower process. The panel will now address some particularly difficult issues for nonprofits, including board composition and size, standards of independence for directors, executive compensation and travel expense policies. These are just a few of the things that the group is going to be thinking through with the Senate Finance Committee.

Editor: The executive compensation issue has been under particular scrutiny by nonprofits for some time.

Coffman: Executive compensation remains one of the really important issues for nonprofits. At the AAA we work with an outside compensation consultant to review management compensation, and we use industry benchmarks and indices. We also have an executive compensation committee a majority of whose members are independent directors. Their recommendations are discussed by the board's executive committee in executive session. For smaller nonprofits without the resources of independent consultants, it is a challenge to find accurate benchmarks.

Editor : How has the transformation of corporate governance changed the duties and responsibilities of the corporate secretary?

Coffman: Ethics play a significant role in the new set of responsibilities for the corporate secretary. Also, the term "governance professional" is a reflection of new responsibilities to a certain extent. In fact, the American Society of Corporate Secretaries recently changed its name to the Society of Corporate Secretaries and Governance Professionals.

Integrity, ethics, and strong governance have particular importance for the AAA. As an impartial administrator of arbitrations, mediations and democratic elections, the AAA must have the trust of the public. It cannot function otherwise. In the two years since Sarbanes-Oxley was passed, we have taken steps to establish standards of director independence and expanded roles for our board and board committees; we review and update our employee standards of ethics and business conduct on an ongoing basis; and - in recognition of our place as a neutral organization - we have set up a mechanism that enables our employees to report allegations of unethical conduct.

Looking at the universe of nonprofit organizations, it is clear that any organization that seeks to solicit funds from the public is going to have to make not only a public commitment to ethical conduct, but also the internal controls and procedures to ensure such conduct.

In addition to enhancing its own governance standards, the AAA has begun to offer an independent fact finding service. The service provides an impartial and objective investigation in an emerging crisis situation, and it operates under the AAA imprimatur of integrity and impartiality. This new service is a reflection, I think, of not so much a new need but rather a newly recognized one. Not too long ago, few people - whether in the for-profit or the nonprofit context - would have thought such a service was necessary.

Editor: What kind of background should the ideal corporate secretary possess? Should he or she be a lawyer? A CPA or financial professional?

Coffman: I think the answer may depend on whether you are in the world of nonprofit organizations or for-profits. Most people who hold the corporate secretary title are attorneys, and they reside in large public and private companies in the for-profit sector. With nonprofits there is no single model. I am not an attorney, for example. I would argue that regardless of professional background, the corporate secretary is going to have to work closely with the person responsible for financial and legal compliance. The skills of the position can be learned, but there are a number of other characteristics that are of crucial importance. A commitment to the highest ethical and professional standards is, of course, essential. A person cannot require ethical conduct of others unless he or she is willing to lead by example. A commitment to the organizational mission and vision is also essential, and this is particularly important in a nonprofit organization which, by its nature, has an altruistic side that is almost always reflected in its board and senior management structure. Finally, the corporate secretary should have the ability to collaborate with others in the work of the organization.

Editor: Who should the corporate secretary report to?

Coffman: I report to the President and CEO, William K. Slate II. I am a corporate officer and member of the senior management team. The authority this represents is helpful when I am asked to move forward with an organization-wide project, such as our corporate records management procedures or our staff ethics training. I also regularly report to the audit committee and other committees of the board on a variety of matters. There are other reporting models, of course. The one I have described appears to be appropriate for the AAA.

Editor: Would you tell us about the emergence of a new function, that of the "corporate governance officer?" What areas does this cover?

Coffman: I think that the Society of Corporate Secretaries and Governance Professionals would argue that they have changed their name to accommodate the expanding role of the corporate secretary. For public companies, the corporate secretary and corporate governance officer roles include: working with boards of directors and senior management regarding a whole range of corporate governance; corporate ethics and compliance issues; ensuring issuer compliance with securities regulations and listing requirements; and coordinating activities with shareholders. With respect to nonprofit organizations, I believe the position entails substantially similar responsibilities, with the exception of the securities and shareholder requirements.

Editor: What about the future? What do you think the position of corporate secretary is going to look like in, say, five years?

Coffman: I think that the answer will depend on whether you are looking at a public, for-profit enterprise or a nonprofit organization. Concerning the latter, the passage of national legislation may result in the consolidation of compliance- and governance-related responsibilities into a single executive position reporting to senior management, the governing board and appropriate board committees. In the meantime, nonprofits are going to continue to take steps to enhance their public transparency.