How well is your board keeping up with the ever-changing world of corporate governance?
Corporate governance is the system by which companies are directed and controlled, and the board of directors is responsible for the management of that system. Although every board is unique, developments in corporate governance can affect every board in some way.
While you read about our top 6 corporate governance trends, consider whether your board has the right tools in place to navigate the road ahead. Can your board go digital while keeping board materials secure? Does your board technology help you to recruit, retain, and engage diverse board members? And is your board able to operate according to corporate social responsibility guidelines?
It should come at no surprise to anyone that the digital boardroom takes the first spot on our corporate governance trends list. With the COVID-19 outbreak, boards around the globe have been forced to take their meetings online. In 2020, the digital boardroom is no longer just an option, it’s a requirement.
Any online board meeting, and especially annual general meetings, presents new challenges and opportunities for boards. More flexibility and some creative logistics are required, and your governing laws, articles of incorporation, and bylaws may require amendments. And even though remote participation in board meetings will feel much different than an in-person gathering, they can still be just as effective. Be sure to learn how board leaders can assist with the transition to remote meetings during this crisis.
In addition, it’s important to invest in the right technology to run seamless video conferences and efficiently prepare for board meetings. Board management software can be used in tandem with your video conferencing software to facilitate both in-person and virtual meetings, allowing you to create, distribute, and store board packets in a secure and timely way. With a board portal, you can also create meeting invitations, develop agendas and minutes, vote, collaborate, and annotate documents in advance of your virtual board meetings.
If you’re struggling with bringing your boardroom online, check out our step-by-step guide and best practices for preparing for remote board meetings.
With the right tools at your disposal, you’ll still be able to practice good governance in your digital boardroom by conducting essential board functions, like voting, while being transparent with your stakeholders. Who knows? Perhaps when the COVID-19 crisis is over, your board will consider making the occasional online board meeting or AGM a regular occurrence.
Even though the most recent headline-grabbing data breaches have involved corporate data, board directors are taking notice as they are increasingly being held accountable for cybersecurity related to both the organization and the board. In fact, credit union board leaders surveyed by CUES reported that cybersecurity now ranks as the top board governance priority out of 12 topics that included risk management, CEO succession planning, and building board diversity. It’s clear that with fast-paced technological advances, board members today are concerned about cyber risk liability, particularly the risks associated with protecting a board’s sensitive information.
However, according to a survey conducted by the National Association of Corporate Directors, only 52% of boards believe that they’re providing effective cyber risk oversight. What’s more, directors can put their organization at risk without even knowing it. According to Forrester, directors have been known to communicate about sensitive board matters over personal email, which leaves them open to potential cyberattacks, breaches, and data leaks. Board material can also be threatened in other ways, such as when it is downloaded onto personal devices or when a director’s mobile device is stolen.
Most boards are turning to board portal software to keep their data safe by providing a secure online location for board material storage and convenient collaboration. However, even boards with the software in place are advised to re-assess the security of their board portal every few years. It’s best practice to evaluate if your board portal software conforms to the highest industry standards for data encryption and security controls, as well as to confirm that it provides two-factor authentication, remote locking, and data erasing features if a director’s device is lost or stolen.
Also, ensure your board portal providers consider how to protect board members from cybersecurity risk as they work, balancing convenient, mobile access to board meeting materials with the most robust technical methods to continuously protect your data.
Corporate culture is an issue both for management and boards. In practice, boards help to set the culture, or “tone at the top,” for the entire organization, which trickles down to all levels. In recent years, workers are placing more value on corporate culture than ever before, so it has become a key ingredient for organizations to attract and retain top talent.
In addition, investors, too, increasingly want to know that a company’s culture can withstand transformation and change. Corporate culture can, in fact, present long-term value, operational impacts, and financial risks. Data from the Russell Reynolds 2019 Global Board Culture and Director Behaviors Survey showed that board members who self-identified as having the most engaging, professional, and productive board cultures discuss corporate culture at more than half of all their board meetings.
Corporate culture is harder to define, understand, and measure relative to other components of strategy, but it’s no less important. The board can play a significant part in helping to define and evaluate it. Have your board, or one of your board committees, ask the management team to develop a dashboard of the most meaningful data and analytics linked to a company’s culture and strategy. Boards can also provide corporate culture oversight by encouraging the use of whistleblower and/or hotline reports within the organization to spot patterns of culture problems or by obtaining third-party data, such as from social media or employer ranking websites.
Recruitment and retention are some of the toughest challenges facing boards today, which is why it has earned a place on our corporate governance trends list. As a KPMG report revealed, 80% of S&P 500 boards have an average age in the 60s. As older board members retire, the challenge for boards is to ensure that new recruits have the right mix of business skills and technical knowledge.
In today’s world, it is not enough to rely on finding new board members from the networks of your current directors. And trying to recruit new members without taking stock of whether you have outdated governance practices is also sure to fail.
To better attract qualified, next-generation board members, be sure to:
Diversity and inclusion have been some of the most discussed topics of the year, and it’s no wonder. Study after study points to a clear correlation between a board’s diversity and its performance. This reinforces the benefits of bringing new ideas and perspectives to the table. It’s also a necessary step towards progressive governance.
In fact, researchers at Tufts University found that decision making improves in diverse groups. And in its Delivering through Diversity report, McKinsey & Company shows that inclusion and diversity support business performance in a number of key areas: recruiting and retaining top talent; better decision making; increasing innovating and customer insight; increasing employee satisfaction; and improving a company’s global image.
Some boards are making great progress. In Deloitte’s Board Practices Report 2019, 94% of surveyed boards are looking to increase board diversity, with the most focus being placed on increasing gender diversity. And according to the Harvard Law School Forum on Corporate Governance and Financial Regulation, one of the top five trends in new director appointments is gender and ethnic diversity on boards.
However, it’s important to not limit board diversity to gender, age, or ethnicity. Professional diversity and a broad skill set are equally important for increasing the diversity of perspectives represented on the board. While directors are required to have basic finance and accounting competencies to sit on a board, it’s critical to assess what other core skills are needed. Skill set inventories and assessments can be helpful to define what each board member provides and where gaps exist. Behavioural competencies such as managing conflict, problem-solving, effective listening, and diplomacy should also be considered, as these qualities will influence the relationships around the board table – both between directors and with management.
Diversity doesn’t just automatically lead to better outcomes, however. Once around the boardroom table, it’s common for the loudest voice to be the most heard, even when they shouldn’t be, and more introverted directors may be left out. And what’s the point of having a diverse board if you don’t receive their insights and input? Your board is stronger, and more effective, when you’re leveraging a diversity of opinions.
Technology, in this case, can act as an equalizer. A board portal solution democratizes communications by providing absolute equal access. All directors receive information at the same time, eliminating the risk of a director firing off an email to only half the board. When administrators circulate board information and updates through the board portal, all directors receive an email alert. Every board member has the same lead time to prepare for meetings. When it’s time to cast a vote between meetings, a board portal’s survey tools ensure all directors can be engaged from anywhere in the world and can cast a vote of the same weight.
With board diversity and inclusion top of mind for many boards, a board portal is an affordable and reliable way to ensure that all directors, no matter their personality, gender, age, or ethnic background, have the opportunity to contribute equally to moving issues forward and managing organization risks.
Corporate board governance is moving towards a higher degree of social consciousness, and it has been for some time. Now more than ever, conducting business in line with corporate social responsibility means being judged on transparency, ethical business behaviour, and environmental sustainability.
The Harvard Law School Forum on Corporate Governance and Financial Regulation has reported that most boards are playing catch-up on how best to define, integrate, and oversee environmental and social issues that are material to their business. What’s more, boards will be expected to strengthen their oversight and knowledge of these kinds of issues and disclose their connection to the business in the form of risks and opportunities.
Measuring success and reporting on activities as they relate to environmental sustainability and ethical business practices is not only necessary, it’s also good for business. External voices and views, including those of board directors, now must hold businesses and management teams to higher standards.
Encourage your board members to challenge the status quo, initiate productive debate at meetings, and consistently consider how they are making valuable contributions to the CEO, the organization, its customers, and the community at large. This will help to open new doors for your organization and will allow you to explore new avenues on how you can conduct business better.
Your board can also lead by example. Adopt sustainable development practices by “going green” and embracing paperless board meeting software. Encourage your board members to reduce their travel-related carbon footprints and to digitally annotate their board materials in your board management software instead of printing them out.
Navigating the road to the boardroom of the future is made simpler with purpose-made board technology, leading to secure and timely communication, better engagement, improved collaboration, and ultimately to more progressive boards.
Ensure that you’re prepared for the future by using board management software. The right technology, like Aprio, can offer you security, reliability, and efficiency, and will boost your corporate governance performance in a number of ways:
Ready to learn more about how Aprio board portal software can help you ensure better corporate governance in the year ahead? Book a demo today, or check out the top 10 things to assess when evaluating board management options.