Secretarial Standards – recommendatory but not mandatory!!! This in itself provides adequate reason and scope for non-adherence to Secretarial Standards. And this is the common scenario in almost every company today where in the Executive Management decides to cut-down costs by doing away with the ‘recommendatory’ Secretarial Standards. However, Accounting Standards are followed to the point because these are ‘mandatory’.
In such situations, what should be the ideal response from a Company Secretary – to invoke legal parameters or implement ideal practices? The best-suited response should be a combination of both.
The Companies Act and rules are procedural legislations, which provide the following framework:
- What a company can do??
- How the same can be done?
- What is not allowed?
This has paved way for the emergence of a “technical solution”, which is a viable solution within the framework of the prevailing law and then may add what would be a prudent corporate practice in line with the high professional standards, ethics, and the Secretarial Standards.
The Company Secretary should be more of a Conscious Keeper of Corporate Standards than being an intelligent and glorified clerk who keeps an account of legal compliance technically. The role of a Company Secretary is to find out the best possible procedure to cater to the requirements of the company all the while being within the framework of the Companies Act. A balancing act between rules, regulations, laws and Secretarial Standards is the prominent role of a Company Secretary in today’s corporate world.
Most of the practices outlined in Secretarial Standards such as approving the accounts by Circular Resolution, are “legal but not ethical”. However, after the extensive deliberations, the consensus is in favour of giving the legal/technical solutions coupled with what should be prudent corporate/ good governance practice.
In the Indian corporate sector, the unspoken word from the Company Management to the Company Secretary is observing law is your job; earning profit is our job. In such situations, the right course of action for the Company Secretary would be to provide a legal solution and depending on the counter-party’s inclination, advising on the applicable prudent practice would be the right decision.
However, the crux of the job is to justify the need for implementation of the Secretarial Standards initiated for the first time by the ICSI. It is crucial to prove that the proper implementation of the Secretarial Standards will usher in uniformity in divergent corporate practices. It is essential to understand that Secretarial Standards will facilitate good corporate governance in the country. Further, it is critical to convince that adherence to the Secretarial Standards will elevate the company's reputation in the corporate sector.
In the era where Corporate Governance is the buzzword in the corporate sector, it is not difficult to convince the managements about the utility and results of adopting the Secretarial Standards in the functioning of the company.
If the Company Secretary profession is to grow, have a respectable place in the corporate world then one has to follow legal jurisprudence. The Profession of Company Secretaryship has grown from Government Diploma to a full-fledged course and professional membership.
The onus is on the Company Secretaries to establish the Secretarial Standards as not only a pioneering movement, but also a noble endeavor. Standardization of practices is the need of the hour to establish a professional outlook about the Indian Corporate Secretary in the global economy. The progressive Corporate Houses in the country tend to make special efforts to show that they practice good corporate governance and implementing the Secretarial Standards has been one of the significant components of these efforts.
With more and more companies opting to implement Secretarial Standards, it should be easier for ICSI to convince the regulators to take into consideration the real practices in the sphere and give statutory mandate for the same.
