Seven years on from the global financial crisis and the pressure is on boards and directors to raise their game and perform more effectively is intense and growing. The aftermath of the 2007-08 crash, and a spate of highly publicised corporate scandals relating to poor risk management and fraud, has seen the scrutiny placed upon company boards intensify.
As a consequence, today’s board now confronts significant oversight accountability that’s part and parcel of an increasingly complex compliance landscape.
What’s more, the uptick in shareholder activism means boards now need to evaluate deals and decisions with greater diligence than a decade ago, as investors and regulators have become less forgiving and are quick to issue challenges to board decisions perceived to impact on shareholder value.
As the definition of board effectiveness changes, boards are embracing digitalisation in a bid to become more high-performing and respond to globalisation and today’s fast-paced business environment pressures.
A confluence of digital drivers
Board processes typically involve significant quantities of paperwork, but traditional document production is both resource intensive to create and costly to generate. Board books need to be manually compiled, printed and distributed in a timely manner, with all pre-publication updates and amends being managed in a seamless fashion.
But these paper-based processes are proving increasingly inefficient, expensive and cumbersome for today’s boards which are becoming more complex both in terms of the number or location of members. International companies and organisations need to ensure the integrity of document delivery and today’s FTSE 100 and 250 companies, for example, can spend an average of £40K a year developing and distributing board books, burning a further £3.5K in additional administration preparation costs for each board meeting.
Compliant meeting preparation involves the distribution of dossiers in line with regulatory timeframes that are formulated to ensure members are able to prepare appropriately and in good time for meetings. It’s a challenge not just confined to global organisations. An increasingly volatile business landscape means many boards now meet with increased frequency, fuelling the need for fast, effective information flows.
Today’s board members and executives also need to be able to collaborate and participate in accelerated decision-making and be prepared for the unexpected. That means enabling geographically dispersed board members to participate in votes and resolutions, even when travelling, or respond in real-time to issues as these evolve. High-performing boards also look to operate a transparent and rolling board agenda that ensures everyone stays informed on events and developments as these occur.
All of which explains why digitalisation is proving to be a game changer for many companies and organisations, especially when it comes to more effective board preparation processes and communications among board members and executive committee personnel.
The digital board – what’s different?
The advantages of going digital in terms of board practice are significant, especially when it comes to the fast and efficient provision of documentation and data directors need to make fully informed decisions.
Board books can be compiled and distributed quickly and with ease – and for the fraction of the cost of traditional paper based methods. Indeed, today’s cloud-based digital solutions can generate an ROI on the production and distribution of board packs in just four months. Board members are able to instantly access completed agendas, draft resolutions and reports, 24/7, no matter where in the world they might be, and are assured of always seeing the latest document version.
Digitalisation also delivers powerful new collaboration and communication capabilities. Board members can electronically annotate documents, sharing comments instantly with executives and other board members. Changes and modifications are automatically captured, time and date stamped, version controlled and tracked. What’s more, digital solutions make digital voting possible so directors can participate in approval processes and ad hoc or formal board meetings, even when physically “not present”.
As well as streamlining the information exchange process, the digital board is well equipped to demonstrate process compliance with local regulatory requirements. The ability to provide an electronic audit trail of documents sent and received, together with the capture of review notes and commentaries, is especially crucial for organisations operating in countries where variants of the Business Judgment Rule apply – typically this includes most common law countries such as the US, Canada, Australia, Germany, England and Wales.
This facility enables the digital board to respond more effectively if decisions are challenged by regulators or investors, demonstrating due diligence and effective governance processes in relation to risk oversight liabilities.
Benefiting a range of stakeholders
Today’s high-performing boards need to be able to successfully accomplish tasks, and digitalisation enables streamlined practices and processes that deliver a framework for consistency and excellence.
Board members can access information anytime and in a timely manner to prepare for discussions and votes, participating with ease in related committee communications and approvals. This streamlined capability is essential for companies operating in geographies such as Germany, where local governance requirements stipulate that supervisory boards must review the legality, propriety and expediency of board management. With corporate governance codes around the world becoming more stringent, management and supervisory boards are under growing pressure to adhere to a “comply or explain” principle in relation to demonstrating good corporate governance.
A key characteristic of high-performing boards is that the responsibilities of board committees and their reporting processes are clear and supported by effective communications among the board, the company secretary and executive committees. This includes the provision of a structured engagement process that enables non-executive directors to make timely and informed contributions.
Digitalisation also delivers significant advantages for the corporate secretariat. Board assistants spend less time preparing board packs, using automated workflow functions to create, distribute and update board packs in native environments such as Microsoft Office or SharePoint.
All of which makes it easy for board secretaries to update documentation fast, implementing last minute changes instantly, and to manage document version control and distribution. What’s more, digitalisation delivers electronic audit trails that make it possible to achieve full visibility of how board materials are used – and by whom. A capability that’s essential for the secretariat when it comes to demonstrating the delivery of board papers within appropriate timeframes, and in full compliance with local country policies and regulations.
Read more on how to tackle a cyber breach.
Share this story