The ICSA: Helping The Corporate Secretary Meet New Responsibilities

Editor: Mr. Escalante, would you tell our readers something about your background and professional experience?

Escalante: I have about 30 years experience in the computer business. Most of that has been in software and consulting. For the last nine years I have been involved in developing entity management solutions for the corporate secretary and legal professions. My prior work, with business process management, has been extremely valuable in light of the similar processes that are now required under Sarbanes-Oxley, in which just about every entity-related activity needs to be tracked.

Editor: Please tell us about ICSA.

Escalante: The Institute of Chartered Secretaries and Administrators - the ICSA - was established in the UK in 1891 as an independent self-regulating body with the purpose of advancing the profession of the corporate secretary and establishing standards for the profession. King Edward VII granted the organization a Royal Charter in 1904, and Queen Elizabeth II is its patron today. The ICSA sets training and performance standards for professional administrators and corporate secretaries throughout the world. We have over 44,000 members, all of whom have been through a six-year qualification process, 22,000 students, and we are present in 70 countries.

ICSA Software International was formed in 1985 as a department within ICSA, and our U.S. office was established a little over four years ago.

Editor: How has the organization's mission changed over the course of its century of existence?

Escalante: In point of fact, the core mission of education and training certification has not changed over time. The major difference between how the organization functioned in the past and how it functions today is technology. We believe we are on the cutting edge in utilizing technology to meet the needs of the profession we serve and the members we represent.

Editor: Please tell us about ICSA's presence in the U.S.

Escalante: ICSA Software North America is the organization's main presence in the

U.S. This is the consequence of a number of our customers - many of which were UK entities with substantial U.S. interests - telling us they required a global entity management solution. In response, and as part of a global strategy, the UK management group decided to implement a U.S. presence with people focused on this market. From an initial group of UK customers requiring a U.S. support organization for their activities here, ICSA Software North America has expanded to establish a major place in the U.S. entity management software market and now services many of the Fortune 500 companies.

Editor: Does ICSA's global presence mean that the products and services the organization provides through its various departments and subsidiaries vary from country to country?

Escalante: To be sure, compliance differs from country to country. In many countries, particularly those with a British Commonwealth background, compliance means providing the correct information - in very accurate and extensive detail - to the British Companies House or its equivalent. In these jurisdictions the amount of information required tends to be much greater than what is required in the U.S.

In the U.S., at least as a general proposition, the amount of information to be provided to the authorities is not really the issue. Delaware and Illinois may ask for different things, but they tend to ask for less than their overseas counterparts. In the U.S., the idea of compliance is built around the business processes that are meant to ensure the accuracy and currency of the information to be provided to the authorities. Compliance here is process-based. There are several factors involved in the process. For example, many of our customers are implementing systems that permit them to verify that the information in the company's database is both accurate and current. This is being done on an ongoing basis. This was not done, generally speaking, in the past. People hoped that the information in the database was updated properly.

In addition, many companies have come to realize that while good corporate governance must begin at the top, it is not enough for the publicly held parent organization to be well run and in compliance with all of the rules and standards if its in-house subsidiaries are not. Good corporate governance must extend through the entire organization, which means that annual meetings must be held when specified in the subsidiary's by-laws, elections to its governing board must be conducted, vacancies must be filled, reports filed, and so on. We have customers which must keep track of as many as 2,000 separate entities. They are able to do this through a combination of in-place business processes, their management's recognition of the importance of these processes and, of course, technology.

Editor: Would you share with us your thoughts as to why corporate governance and the role of the corporate secretary have taken on such importance today?

Escalante: While the role of the corporate secretary has been evolving over a long period of time, the corporate scandals, Sarbanes-Oxley and the intense focus on corporate governance has served to give the position a central role in the organization's compliance obligations. Prior to the current situation, what mattered most was whether the numbers were being met. If, for example, the Brazilian subsidiary was profitable and meeting its targets, there was a tendency to assume everything was in order, and the governance questions were not pursued. Today, there is a recognition that the organization must be able to track and justify every action that occurs, and in order to do so there must be a process which functions with accuracy and transparency.

An important example of the new responsibility the corporate secretary bears has to do with the creation of new entities. Prior to Enron, few questions were raised with respect to setting up a string of different entities. Today, a great deal of attention is directed at the creation of any new entity. What is important is that there be a documented and approved procedure in place that ensures everyone who needs to approve a new entity has in fact done so and evidence is in place, and readily available, to prove such processes.

The corporate secretary is also engaged in coordinating and overseeing the work of the board of directors. This includes ensuring that comprehensive and detailed information is in the hands of the directors in a timely manner prior to meetings. Technology is a great boon in this regard. The meeting of the board has become a substantive forum, and the deliberations of the directors are expected to meet the highest of standards. Again, technology has a very important role to play in these meetings, and it is the corporate secretary who generally is expected to see to its availability.

Editor: Please tell us about the solutions that ICSA is offering this particular market.

Escalante: Our main product is Blueprint OneWorld. It keeps track of legal entities, officers and directors, the organizational chart, and the minutes of meetings. It also supports seven different languages, includes an international forms library with over 600 forms for some 15 jurisdictions and the ability to generate, say, a unanimous consent for some 20 countries.

While this product has been in existence since the mid-1980s, there has been a tremendous surge in interest over the past few years, and today we are the largest supplier of entity management software, with about 2,400 customers worldwide.

Post Sarbanes-Oxley, the dependency on accurate and timely legal entity data has become imperative for reporting and, should things go wrong, legal investigations. Many departments within an organization keep their own records, which are often out of date and inconsistent and thereby a source of potential liability for the directors. Blueprint OneWorld provides a single authoritative source for entity specific data for all of the organization's departments.

We have a product called Corporate Disclosures, which has the Sarbanes-Oxley, NYSE and NASDAQ rules, the UK Combined Code and similar rules for France, Malaysia and other countries embedded as a series of questions and answers. A question concerning board independence, for example, will take the user through an extensive repository of the applicable standards across a variety of jurisdictions, in addition to examining whether the right process is in place to evidence independence for any particular jurisdiction.

Another system in development has to do with the dissemination of information to the organization's governing board. This is a paper process today and, for the foreseeable future, it will entail both paper and electronic dissemination. Technology has made it possible, however, to get relevant information to board members right up to the moment of the meeting. As this evolves, we will be at the forefront with appropriate products and services.

We are also engaged in a variety of areas that usually involve the corporate secretary, including Section 16 and Rule 10b5-1 filings, ethics management and the tracking of whistleblower and similar activities.

Editor: In light of the attention this area has received in recent years, this is a very competitive market. How does ICSA go about differentiating itself from the competition?

Escalante: Who we are and where we come from is central to our differentiation. The ICSA is the recognized global authority on corporate governance. We are a not-for-profit organization with over 100 years of experience in training corporate secretaries the world over and in establishing and disseminating the professional standards and corporate governance codes used in over 70 countries today. It is this singular expertise that makes our products and our support the most comprehensive and reliable in the world.

While my particular focus happens to be in the U.S., I have colleagues with years of experience in most areas of the world where global business is conducted. Together we have established an excellent reputation for being able to implement our systems successfully on both a national and an international basis and to provide real global knowledge on current and developing issues. As an example, on legislative developments in Hong Kong, we have the ability, through our people on location, to track all the changes, assess the implications of those changes and integrate that knowledge into our products. With such products our customers in the U.S. can manage their entity data and jurisdiction-specific compliance both at home and abroad. None of our competitors have both the local presence and the global reach that we enjoy in this field.

Editor: Does this mean that we are working toward some convergence of corporate governance standards in the international arena?

Escalante: Historically, U.S. and UK law have been primary drivers of developments in corporate governance. While the two legal systems started at different points, there is some convergence. I think the degree of convergence can be overplayed, however. I do not see any real convergence with respect to corporate governance any time soon in the global arena. The legal traditions are simply too different for a single set of corporate governance rules to emerge, at least in the near future. For example, companies in the UK, Germany and the U.S. approach the issues that arise in corporate governance with different mindsets. To say nothing of the U.S. mindset, which is dealing with a distinct agenda, and, accordingly, varies significantly from the other two. The good news, I would like to point out, is that we have the means of addressing the issues that arise in each of these jurisdictions, in addition to those that arise across the entire spectrum of the global arena.

Published April 1, 2006.