Enlightened Corporate Governance: At The Center Of The Discussion Of The Corporate Secretary's Role

Sunday, April 1, 2007 - 01:00

Editor: Mr. Mostyn, would you give our readers an overview of your responsibilities at Bank of America?

Mostyn: I am the Deputy General Counsel and Corporate Secretary. I oversee several areas, including corporate governance. As the Secretary, I am charged with taking minutes of meetings of the Board of Directors and of board committees and with maintaining the corporate records. The latter function includes keeping track of some 2,000 subsidiaries, both within the U.S. and overseas. In that role, I also deal with our largest institutional shareholders on a variety of governance issues

I am also responsible for M&A transactions at the corporate level, most recently Bank of America's acquisitions of MBNA and U.S. Trust Company.

In addition, I am responsible for SEC compliance in the context of the 1934 Act. This entails the Bank's financial reporting and other public disclosure obligations.

Finally, I work on the transactions undertaken by the Bank's Treasury Department, which is engaged in debt offerings throughout the world.

Editor: And your responsibilities at the Society of Corporate Secretaries & Governance Professionals?

Mostyn: At the present time I am Chairman of the Board, which means that I run board meetings. This is a fairly large group, so building consensus is not always easy, although it is among the Chairman's responsibilities. I am also responsible for setting the overall strategic plan of the Society for the year of my chairmanship.

Editor: How did you come to join the Society?

Mostyn: I was previously employed by the Gillette Company. As the senior corporate attorney, I assisted the company's Corporate Secretary on a variety of governance matters, and when she left I was asked to take on her responsibilities. At the time, I thought joining the Society would help to bring me up to speed on the functions of a corporate secretary.

When I joined I was asked to take on a position of President of the Eastern New England Region of the Society and help revitalize that group. I did, and as a result I became familiar with the Society's leadership and national staff. In time I was asked to join the Society's Board of Directors.

Editor: The Society is in a rather unique position to influence progress toward enlightened corporate governance. Would you give us your thoughts on how that role has evolved over the past few years, particularly following the corporate scandals and Sarbanes-Oxley?

Mostyn: Prior to the scandals at Enron, WorldCom and the others, several companies - Pfizer, for one - had a reputation for outstanding corporate governance practices. When I became Corporate Secretary at Gillette, I wanted to reorganize the way the governing board did business and to bring Gillette into that leadership group with respect to corporate governance. We brought in a number of advisers, including Jay Lorsch of the Harvard Business School, to help us achieve this goal. Among other things, we drafted new corporate governance policies, developed charters to provide a basis from which the board carried on its work and related to the company's various constituencies, and we established a corporate governance committee of the board.

With the corporate scandals, all of these efforts went into high gear. Soon enough Sarbanes-Oxley, new SEC regulations, the new NYSE listing standards, and the like, pointed to a dramatic change in the role of the corporate secretary. The Society, of course, was at the center of the various discussions taking place at that time concerning the role of the corporate secretary. What I think has emerged is a rather sophisticated role, one in which the corporate secretary is a corporate governance advisor to the company and its governing board. And, predictably - since so many governance issues are legal issues - the position is increasingly held by lawyers.

Editor: Who should the corporate secretary report to?

Mostyn: In light of the legal underpinnings of so many corporate governance issues, and of the legal nature of the company's relations to the investing and general public, I believe that the corporate secretary should report to the general counsel. I am aware, however, that a great many report to the CEO or to the board chairman, and there is something to be said about both of those reporting lines.

Editor: Please tell us about the Society's committee structure. What are the national committees, and what are their specific missions?

Mostyn: We have several committees. One of the key ones is the Securities Law Committee, which is charged with working with the SEC to frame a variety of issues. The SEC, in addition, looks to this committee to provide input on SEC rulemaking, both existing and proposed, because it is this group which represents those who actually execute the rules. This enables the Society to express its concerns directly to the regulators, and, needless to say, this is one of the most important lines of communication that we possess. We rely heavily on the advice of our members who are law firm lawyers, but most of those involved in this effort are people who are actively engaged in the corporate secretary role.

The Corporate Practices Committee is another key committee in that it deals with the core functions of the corporate secretary position. This includes record-keeping, the taking of minutes, organizing an annual meeting, preparing proxy statements, and the like. For new members, this is an essential committee.

The Public Company Affairs Committee also plays an important role for us. It deals directly with the proxy advisory firms advising institutional shareholders on their voting. These firms have become very influential during the proxy season, but they are also important with respect to the entire corporate governance discussion. For the same reason we think it essential to have direct contact with the SEC, we believe it is essential to connect with these firms. We can help them frame the issues and develop a common sense approach to those issues with an enormous group of institutional investors and thereby ensure that the same standards are applicable across the board.

The Listing Standards Committee is a new committee. Recognizing the importance of listing standards by the securities exchanges, we thought we should form a committee to connect directly with the exchanges. We seek to help them develop rules and regulations that reflect the expertise and experience of our members.

The Educational Programs Committee is concerned with providing the Society's membership with programs on a variety of issues, including the evolving ones.

The National Conference Committee sets the agenda for our annual national conference. Its mission is to plan a meeting at which we fulfill the need of our membership for educational programs relating to the current issues, for a forum at which an exchange of ideas can occur and for networking, which is one of the Society's principal purposes. If the committee gets this right, we have an opportunity to attract new members.

Editor: What are the key issues that have come to the surface in the committee discussions since the corporate scandals and Sarbanes-Oxley?

Mostyn: One of the issues we face is staying abreast of the myriad of rules and regulations - and the constant changes in the rules and regulations - which the modern corporate secretary is expected to know. Another issue is keeping our members apprised of the evolution of governance standards, both in the U.S. and overseas. To the extent that the Society participates in these discussions, we are attempting to inject an element of reasonableness into the process.

Even prior to Enron there was a cottage industry comprised of people who claimed to be corporate governance experts. Post-Sarbanes, this has become a very big industry. Some of the people in it are knowledgeable, but many are not. And there are those who work in this area who have very particularized agendas. The Society attempts to provide its membership with guidance here. It is increasingly important, particularly for our small company members, that they have the resources available to enable them to navigate in this arena.

Editor: Please tell us about the initiative that the Society has developed with The Conference Board on seminars aimed at corporate directors.

Mostyn: A few years ago we began putting together lists of educational opportunities for corporate directors. Certainly no one would question the need for directors to have a familiarity with their governance responsibilities today, and we have moved past simply providing lists of available offerings. Being able to partner with an organization with the stature of The Conference Board means that we are actively engaged in the educational process. This undertaking also allows us to steer our members toward programs of extraordinary quality and depth.

Editor: What is on your agenda? What would you like to accomplish during your term as Chairman?

Mostyn: Several years ago the Society changed its name to include a reference to "Governance Professionals." That was meant to signal a significant increase in the responsibilities of the corporate secretary, and, indeed, many became what was referred to as the "chief governance officer" of the company, with an active responsibility for compliance. For the Society, the change in name led to some confusion among the members as to the persons we should be targeting for membership. Do we reach out to lawyers engaged in corporate governance practices, for example, or to academics in this area? We have had this discussion, and I think we are positioned to move forward. We do not wish to be so structured that we cannot move with a changing landscape, but we do not wish to be so unstructured that we lack focus and direction.

Another important agenda item for me has been to rejuvenate our efforts to increase membership. We joined with the NYSE several years ago in a program to encourage people to join the Society, and we are trying to do the same thing with NASDAQ.

Editor: Is there anything you would like to add?

Mostyn: As a consequence of the tremendous attention that corporate governance has received in recent years - in terms of case law, statutes, rules and regulations and commentary by leading scholars - it has become a full-blown enterprise. I think that, if corporate America is going to remain competitive in the global economy, it is important for the weight of regulation to lift a bit and for the intensity of the scrutiny directed at governance to lighten. Companies need time to digest what has already occurred, not more regulation. Many governing boards are so focused on process that they fail to give the substantive issues - the company's strategic business issues - their due. The point is, most companies were not badly run when Enron took place, but all of them are having to pay a heavy price for Enron's sins. I do not think that is fair. In addition, it serves to dampen the enthusiasm of foreign enterprises wishing to invest in our economy, and it hinders American enterprises from competing in the global arena.

Please email the interviewee at william.mostyn@bankofamerica.com with questions about this interview.