China, the Difficulties of Being a Board Secretary

Corporate scandals and misconducts often direct attention to the problems of governance failure. Over the last few decades, the topic of corporate governance receives substantial attention from practitioners and scholars. Despite the tremendous scholarly efforts in searching "best" governance practices, it is difficult and even unlikely to identify the effective governance mechanisms that work for all firms across contexts. Institutional context often serves as a contingency factor that affects the effectiveness of a governance practice. When a governance practice is introduced from one context to another context, it may become ineffective or adjusted to fit in the new context.

For instance, one understudied role in corporate governance is a governance professional that carry different titles across countries, such as "company secretary" in the United Kingdom, "corporate secretary" in the United States, and "board secretary" in China. "Company secretary" has more than a hundred years of history in the UK. Its role evolves gradually from a "mere servant", doing what they are told to, to an important senior officer that contributes to board decision making and protects shareholder interests. They are often recognized as "Chief Governance Officer". The question is whether their counterparts in transition economy like China play a similar role in corporate governance.

China's economic achievement in the past decades is associated with the continuous improvement of corporate governance. To improve Chinese firms' corporate governance to international standard, policy makers look to Anglo-American systems for solutions. Board secretary practice in China starts in mid-1990s with a short history and receive increasing attention from regulators and practitioners in the recent decade. According to the Corporate Law in China, every listed Chinese firm must have one board secretary. Board secretary is a senior officer with many responsibilities including information disclosure, shareholder relationship management, providing governance advice, etc. One special aspect about board secretary is that he or she is assigned as the person that connects Chinese listed firms with stock exchange markets to make sure that the listed firms comply with stock exchange requirements. People must receive trainings and obtain certificate issued by stock exchanges in order to become a board secretary. After becoming board secretaries, they are expected to provide trainings and advice to board of directors and executives on governance issues. If anyone violates regulations or law, board secretaries are expected to report to stock exchanges. Board secretaries are responsible for information disclosure and may get involved in big company decisions to make sure that minority shareholders' interests are protected.

Despite board secretaries' huge responsibilities in corporate governance, there is a lack of fundamental legal and social institutions to support their work. As China is transitioning from planned to market economy, the state attempts to make Chinese firms more competitive in the international market and aims to maintain political stability and control of Chinese companies. Many listed firms are state-owned and government officers are in top management team or the board of directors. Ideally board secretaries should influence and monitor directors and executives on behalf of minority shareholders and stock exchanges. However, in reality board secretaries are subject to the pressure from powerful controlling shareholder, board chairman, and executives. That is why board secretary is often described as a risky and disadvantaged profession, as they face competing demands from multiple constituencies and rely a lot on the company insiders for compensation.

To solve the problem, Chinese regulative authorities strive to make board secretaries more independent and professional by modifying and specifying the qualifications, rights, and responsibilities of board secretaries. Board secretaries' characteristics definitely matters, especially their professional qualifications, integrity, and soft skills in managing relationships. From my point of view, the effectiveness of board secretary practice is not only determined by the characteristics of a board secretary, but also the existing governance arrangement of a firm, as well as the development of capital markets, legal system, and political institutions in China.