Is your board keeping pace with the shifting landscape of board governance? Are you ready for generational changes in leadership and intensifying board data security risks? Is your board embracing vital technology to operate with efficiency and inclusion?
Although each board is unique, there are a few modern developments in board governance that affect every board in some way. Whether yours is a corporate, nonprofit, or Crown board, changes in the world of board governance can dramatically alter the way your board must function to perform.
How ready are you? And do you have the right tools to help you navigate the road ahead? Let’s start by reviewing the top 5 developments that are shaping modern board governance.
“Members of “Gen X” are primed to take on nearly every important leadership role in organizations. They already hold 51 percent of leadership roles globally and will grow into more senior positions.”
– Global Leadership Forecast 2018, Development Dimensions International
In the coming years, most director roles are on track to be filled by members of Generation X, the segment of the population born between the mid-1960s and the mid-1980s. As Baby Boomers retire, boardrooms are quickly becoming occupied by these digitally savvy leaders who insist on immediacy, reliability, and data security. They also expect collaborative technology and reliable access to information around the clock, wherever they happen to be.
According to the Global Leadership Forecast 2018, members of Generation X have powerful leadership qualities, strong technical skills, and place a high value on collaboration. In fact, Generation X is helping to bridge the “digital divide,” because they are just as confident in their digital leadership skills as millennials but are generally more comfortable leading with empathy, allowing them to be able to better tackle the challenges that technology poses to their colleagues and consumers.
Gen Xers are effective team players, and there’s a clear link between collaboration and productivity. We also know that Generation Xers crave professional development and mentorship – and this desire includes coaching from external sources rather than their own boss or co-workers. So what does this mean for recruiting and retaining top talent?
Developing next-generation leaders and attracting and retaining top talent on boards are some of the top CEO concerns cited in DDI’s Global Leadership Forecast 2018. Clearly, succession planning is vital. It’s estimated that 10,000 Baby Boomers in the US become eligible for retirement each day. And while board members are getting younger, the challenge is ensuring the right mix of business skills and technical knowledge, giving potential successors the room to grow and hone the skills they need for director roles.
In the nonprofit sector, directors are known for working tirelessly and past retirement age in positions they love and for causes that ignite their passion. Succession planning may get overlooked. The report Next Generation Governance: Emerging Leaders’ Perspectives on Governance in the Nonprofit Sector acknowledges this occurrence and flags the need to nurture the talent pipeline in order to create sufficient opportunities for emerging leaders so they can grow and build confidence in their skills.
While experienced experts remain valuable on boards, board leaders are focusing recruitment efforts on younger, next generation directors and executives. With the next generation, boards are observing that younger directors and CEOs join with the expectation of making a meaningful contribution in a shorter tenure than seen historically.
However, in a KPMG board leadership survey of 2,300 directors, just 14% had a detailed board succession plan. One-third of directors reported little or no discussion about board succession. There are increasing calls to make succession planning a top priority, if not the top priority
Boards need to set the stage to accommodate the next wave of leadership and put in place the development opportunities that emerging leaders crave – this will help them perform at their peak and keep them engaged.
“As companies address new challenges, and a younger generation of executives with very different backgrounds become independent directors, boards will need to find the right balance between experience and relevance; they will also need to become more dynamic in terms of composition, diversity, discussion and tenure.”
– Spencer Stuart, How Next-Generation Board Directors are Having an Impact
Diversity and inclusion have been some of the most discussed topics of 2019, and for good reason. Creating a diverse team and an inclusive board is a necessary step towards progressive governance.
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.
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.
The benefits are clear. So how do we build diverse, inclusive boards and keep directors engaged?
In an age of continuous recruitment, and new recruits’ heightened expectations to contribute immediately to board conversations and decisions, boards must have processes and technology in place to effectively onboard and engage new directors and leaders right from the start. Board teams must also orient newcomers with the critical organization knowledge required so that they can begin contributing to board discussions.
Across North America, boards are making strides towards both board diversity and board inclusion, but we’re not there yet, writes Isabel Meharry:
“Organizations spend a lot of time and money on selection and education of board members. Board recruits are usually selected for either their functional expertise or their industry knowledge. These carefully selected board members have the ability to add considerable value to the organization. However, the potential contribution of each board member will only be realized if new members are fully engaged. Only with an inclusive culture will it be possible to draw out an authentic view point from every board member. If your board is successful at engaging diverse members, more perspectives will be heard, and there will be more open discussions of sensitive topics, which should result in improved board decisions.”
We know that the board sets the culture for the entire organization, setting the “tone at the top” that trickles down to all levels. And so the benefits of diversity have a ripple effect, and organizations have begun to see the value of a board that is diverse and representative of their membership, their customers, and the communities they serve.
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 Harvard Law School Forum on Corporate Governance and Financial Regulation, one of the top five trends in new director appointments is both gender and ethnic diversity on boards.
Even on boards that have achieved more of a gender balance, there continues to be a priority placed on diverse board recruitment, including from members of different ages, ethnic, and demographic backgrounds. The board of directors is increasingly seen as an opportunity to represent both the communities the organization serves as well as critical board competencies.
“The demand to collaborate and share sensitive information in a protected environment is increasing, and we see this as a significant trend.”
– Next Generation Governance Management Solutions, Nasdaq Corporate Solutions
Nothing spooks us more than a major cybersecurity incident like the Capital One data breach that was revealed in July 2019 – one of the worst ever. A hacker accessed the financial and personal information of 6 million Canadians and 100 million Americans who had applied for credit cards since 2005. The incident left a terrible taste in the mouth of consumers and triggered class-action lawsuits, and also created a reputational mess for the company.
The troubling fact is that Capital One was just the latest in a series of massive data breaches in recent years that included Target, Home Depot, Yahoo, Equifax, Bank of Montreal, Simplii Financial, and Facebook. Just as alarming is that three of the data breaches in 2019 are among the largest of all time.
In the spurt of hyper-vigilance that follows scares like these, organizations are left questioning the trustworthiness of their software. In the Capital One case, the hacker exploited a misconfigured firewall, not a weakness in software or cloud storage. Nevertheless, the wakeup call was resounding.
Safeguarding data is always top of mind but the message has come through loud and clear: data risks aren’t going away.
In addition, the costs of cyber security are on the rise. Last year, the cost of cyber security for companies rose 22.7% to an average of US $11.7 million, primarily due to security breaches. However, 95%of data breaches are preventable, according to the 2018 Cyber Incident and Breach Trends Report.
It’s clear that protecting your board and sensitive information has never been more important. A Gartner survey shows cybersecurity is a deep concern for organizations. But only 52% of boards believe they’re providing effective cyber-risk oversight, a sobering statistic from the 2018-2019 National Association of Corporate Directors Public Company Governance Survey.
Directors can even put security at risk without being aware of 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.
Depending upon how data is sent electronically, directors can put it at risk when accessing documents. Emailing board documents or sharing them on free editions of software like Dropbox or Google Drive poses real security risks. Likewise with SharePoint – documents are only secure when they reside within the system.
Dropbox may seem secure due to its AES 256-bit encryption, but similar to email, your data will not stay in Dropbox. It will be opened by directors and potentially saved elsewhere, such as on their desktop. As soon as they’re downloaded, you’ve lost control of those documents. SharePoint and other in-house platforms have a similar problem. Even if documents are accessed in SharePoint, most board members don’t feel as comfortable in a corporate file drive as non-employees, and it’s common that they will move files to non-secure locations.
Forrester indicates that 30% of board members reported losing or misplacing a phone, tablet, or computer in the past year. The key issue for board administrators is whether you can remove data from a lost or stolen device if you need to. Email, documents, and even Dropbox access are instantly at risk if this cannot be done. Being able to purge board data in an instant is essential to keep board material confidential.
Next-generation governance will see a higher level of awareness of cybersecurity and risky practices, thereby increasing confidence in the security of information and communication.
“ESG matters often have important reputational impacts and significant public, investor, and stakeholder relations dimensions.”
– Time to Demand Accountability Regarding Mutual Fund “Risks”, Harvard Law School Forum on Corporate Governance and Financial Regulation
Board governance is moving towards a higher degree of social consciousness. Whether you call it environmental, social, and governance (ESG) factors; corporate social responsibility; or responsible capitalism, it means that more and more organizations are judged on transparency, ethical business behaviour, and environmental sustainability.
In fact, McKinsey & Company describes sustainable investing as the “new normal.”
Harvard Law School Forum on Corporate Governance and Financial Regulation also reported that a top trend in new director appointments is a focus on non-financial skill sets, including ESG expertise.
More than half of public company directors recently surveyed said they want their boards to improve their understanding of ESG performance measures. In the nonprofit sector, leaders are looking to have a meaningful, positive impact to “move the needle” on entrenched social issues.”
“As those in their 30s and 40s join boards in the coming years, they will not accept paper-based working and the formal management of information flows from yesteryear.”
– Next-Generation Governance Management Solutions, Nasdaq Corporate Solutions
Paperless, instantaneous, collaborative – a description of efficient boards and the way they communicate, share information, and make decisions. Streamlining board operations and making meeting preparation quick and easy are essential for keeping costs in check, and that includes expenses for paper and other supplies, as well as staff time and resources.
Boards should be continuously striving to improve their effectiveness and efficiency. This can significantly impact their agility, which improves their ability to handle risk, navigate through crisis situations, and ensure business continuity in challenging times.
“The future board could look significantly different. Technology has the potential to fundamentally change the way boards meet, breaking down global barriers with virtual reality, holoportation, and instant voice translation. Technology should also help transform the way boards operate to ensure directors are more informed and equipped to monitor organisations and make decisions.”
– Always on Duty: The Future Board, Institute of Directors, New Zealand
Technology is the ingredient that ties everything together, leading to secure and timely communication, better engagement, collaboration, and, ultimately, more progressive boards.
Board meeting management software, or a board of directors portal, is a powerful tool that helps engage high-performance directors by providing convenient, confidential information access. Board portals streamline the process to prepare for meetings, and they improve timely ongoing communication between board members and executives to support quick decision making in increasingly competitive times.
The report Always on Duty by New Zealand’s Institute of Directors forecasts a day when technology is at the heart of every activity a board carries out. Contrast that with a report by Forrester, indicating that North America’s usage rate for board management software sits at 32%, the lowest in the world.
Who has the highest? Boards in Asia Pacific with 54% of boards, followed by 48% of boards in Europe.
This means most boards in North America are not operating at their full potential. They’re missing out on vital opportunities to attract and maintain the loyalty of board members who expect tech tools to communicate efficiently. Even worse, boards are leaving themselves open to devastating and costly cyberattacks.
The right board software offers security, reliability, and efficiency. It boosts performance in a number of ways:
Let’s go back to the 5 trends of next-generation board governance we explored earlier and assess how board software can enhance board performance in those areas.
“As existing directors are replaced by those coming through the mid- and senior management ranks now, we expect boards on the whole to become more digitally aware and not only willing to accept new technology, but embrace it for the benefits it can deliver to them personally and to their organizations.”
– Next Generation Governance Management Solutions, Nasdaq Corporate Solutions
Digital expertise will become prevalent in the business boardroom – and it will be necessary. As young leaders rise up the ranks, Generation X will dominate boardrooms of the future in the coming years. According to Ernst & Young research, Gen Xers are perceived by many to be more effective managers than Baby Boomers or Generation Y (more commonly called Millennials). The same research indicates that Gen Xers also seem to display more traits associated with adaptability, problem solving, and collaboration.
Gen Xers are valuable leaders – and so, organizations must do everything possible to attract and engage them.
Board meeting software provides tools to support recruitment and onboarding to help attract a diverse crop of next-generation directors. In fact, just demonstrating to potential members that your board is using progressive technology will help you attract the right prospects. Younger board members are already adept at using intuitive technology solutions at home and at work, and may be less than enthusiastic about reverting to three-ring binders of information and long email exchanges.
Beyond recruitment, you also need to be able to ramp up new directors quickly so that they are informed and ready to contribute at board meetings immediately. A board portal can quickly orient your new members from day one by helping to communicate important dates and key information. Access is equitable, as all new directors undergo the same online onboarding process.
As your new directors take on committee roles, or if they have questions about past decisions, all the information they need is contained in the portal. They can simply log in and start searching. It’s a self-serve, one-stop-shop process.
Effective board management software enhances collaboration by enabling easy and secure access to information and remote voting capability. This can lead to better risk management and handling of crises, because board portal software improves your board’s ability to make fast decisions and take quick action.
Board portals also provide a forum for preparation and discussion ahead of board meetings. The most productive board meetings are the ones used for discussing materials or making decisions, not catching up on background information or rehashing old discussions.
You can make sure this happens by providing directors with a discussion tool in your board portal to use for conversations before and in between meetings. Board members also consistently report that they are more engaged in the strategic objectives of a board when they have access to board management software that “allows for document annotation, sharing, and transfer.”
Technology is like a roadmap – finding the best-fit board of directors software for your organization leads to higher levels of collaboration and director engagement, which in turn supports recruitment and retention of talented, next-generation leaders.
“It is vital for inclusion that board information gets to every member in a timely way. Board technology can level the playing field by providing equal access. Boards need easy-to-use tools that empower everyone to prepare for meetings and participate in decisions, including online votes. Some boards use online note taking and discussions to support collaboration and relationships between board meetings.”
– Board Inclusion: Are your members comfortable speaking up? , Isabel Meharry, FCPA FCA, MBA, Cdir, ACC
On some boards, only two or three board members are consistently engaged. Most of their directors are missing the mark, likely due to gaps in how the board debates, communicates, frames conversations, votes, and runs board meetings.
The best-fit board portal helps close the gaps in your board and boost engagement.
Board meeting software provides equal and efficient access to board information for all directors, at the same time. Giving all your directors an equal voice is essential to keeping them engaged. Having an equal voice means that directors have the ability to share their thoughts and opinions in a forum beyond meetings. It also democratizes the environment, giving directors a way to ask questions, annotate documents, and raise their concerns online. An introverted director may not feel comfortable voicing his or her concerns in a meeting, but because it can be shared online in advance, everyone has a chance to be heard.
“The more data a business gathers, the more they store in the digital landscape, the more vulnerable they are to potential data leaks and security threats.”
– Next Generation Governance Management Solutions, Nasdaq Corporate Solutions
4.1 billion. That’s how many records were exposed during the first half of 2019 in just over 3,800 reported data breaches. This is more than double the amount of breaches reported a year earlier in the first half of 2018.
Survey after survey shows cybersecurity as a top concern for organizations. The 2019 CEO Imperative Study by Ernst & Young – reflecting the views of CEOs across the Americas, Europe, the Middle East, Africa, and the Asia-Pacific – identifies national and corporate gaps in cybersecurity as a top threat when it comes to business and the global economy.
The good news is that constructive action is on the horizon. Gartner estimates that in the near future, virtually all large enterprises will need to report annually to their board of directors on cybersecurity and technology risk.
Board management software can help board administrators control whether documents may be printed or downloaded, and it also allows them to track who has accessed documents.
Beyond being a one-stop source for board materials, a board portal provides instant tools for directors to annotate documents and discuss board decisions. Whether these discussions take place across the whole board or are specific to a committee of select directors, it’s all kept secure. Administrators can also pose questions to the board through surveys. These features help keep sensitive topics out of everyone’s inbox.
Time and time again, we’ve seen evidence of how a security breach can be a devastating blow to an organization, from both a cost perspective and a reputational standpoint. Board meeting software provides stringent security features, including document and communications encryption with secure document storage. Layers of advanced security give you the power to control access, guarantee compliance, and remotely wipe data from lost or stolen devices.
“Next-generation governance prioritises environmental, social, and governance (ESG) performance tracking. New and upcoming talent can be drawn to firms that have strong ESG practices. But boards need technology that allows benchmarking and even real-time tracking and promotion of ESG efforts.”
Harvard Law School Forum on Corporate Governance and Financial Regulation recommends boards be heavily involved with developing and monitoring environmental, sustainable, and governance (ESG) standards.
Engaged board members 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 opens new doors for the organization and explores avenues for how to conduct business better.
Measuring success and reporting on activities as they relate to environmental sustainability and ethical business practices and is not only necessary but also good for business.
As disclosure requirements continue to amp up, there’s a shift underway that the Harvard Business Review describes as transparent business leadership. External voices and views, including those of board directors, now must hold businesses to higher standards.
Here’s how board portal software can help to improve board transparency:
Board portals provide all directors with full access to board information in the same instant, from any device, anywhere in the world. No more lost emails or time-consuming catch up discussions at board meetings.
No hiding secrets in a closet. Meeting minutes, motions, and information is logged in a library for future access.
All directors receive electronic notice of changes to meeting timing, requests for votes, and access to the latest information at exactly the same time. Favoritism, nepotism? There’s no risk of communication bias with a board portal.
Important decisions sometimes must occur between meetings. Voting via board meeting software makes decision-making transparent and provides equitable input and influence for all directors. Remove the temptation for an inner circle to direct choices versus including everyone.
The board’s biggest accountabilities are to oversee CEO performance and that of directors, but it’s easy to let evaluations get casual, or infrequent, and then you lack a baseline for monitoring performance changes over time. Board portal tools make it simple to schedule surveys and share results for evaluating directors’ contributions, as well as to confidentially evaluate the CEO.
“Nearly all companies are looking for ways that technology can be used to improve their business models, customer experience, operational efficiency, and more – and boards must help them move forward at a sufficient pace, advocating for change by supporting and sometimes nudging their CEOs.”
– It Pays to Have a Digitally Savvy Board, MIT Sloan Management Review
Board meeting management software is the backbone of efficiency. Board portals engage high-performance directors by providing convenient, confidential access to information. They streamline the process to prepare for meetings, and they improve timely communication between board members and executives to support quick decision making in increasingly competitive times.
Consider the potential cost savings for your organization. How much time does it take your board administrator to prepare board meeting packages? How dependant is the board on the assistance of your IT staff? The right board software reduces staff time and makes access to documents quick and easy. And because a board portal is a digital solution, the need for hard copies is virtually no more. This reduces expenses for paper, bulky binders, and courier services.
Situations will always arise that require fast action. They can be mergers or crises – anything from a data breach to a natural disaster. Board members need to communicate from wherever they are and they need the right technology to ensure quick, easy, and secure access to information, communication, and voting.
Directors need board information to be easily retrievable and searchable, including both historical and current board documentation. You can’t afford to waste time by making them hunt through emails and files for the information they need.
Without a doubt, there’s a high-tech future ahead of us. Don’t get left behind. By adopting the right board management software now, your board will be able to take full advantage of future advancements in technology.
The next crop of leaders has a lot to look forward to. After all, the mere introduction of the tablet into the boardroom less than a decade ago transformed the way boards do business. With technology evolving in leaps and bounds, the possibilities really are endless.
In addition to the well-known advantages of board software, some predict that technology will go even further. One day, augmented and virtual reality may be used to do away with the constraints of physical boardrooms. Boards could run “virtual” meetings, engaging directors in real time from wherever they happen to be in the world.
Virtual reality could be especially helpful for organizations that have global reach. In its report Always on Duty: The Future Board, New Zealand’s Institute of Directors identifies a myriad of possible uses for the technology:
“VR provides a greater opportunity to experience the business in different ways such as showing directors remote locations or new premises that are under construction. We don’t see VR replacing site visits but it will be a valuable supplemental tool. VR will also enable directors to appreciate health and safety risks in the business in new ways, for example by getting to experience what it is like for staff using certain machinery.”
Setting your organization on the right path now with a best-fit board portal solution lays the groundwork for future success. It creates a forward-looking, innovative environment for future leaders. And adopting board portal software today leads to high performance by increasing board efficiency, security, transparency, and director engagement.
Whether you’re looking to make a switch or adopting board portal software for the very first time, we invite you to consider Aprio board portal software. According to Capterra, Aprio is the trusted choice of credit unions, financial institutions, Crown corporations, nonprofits, and public companies across North America.
Aprio delivers in five key areas that support board effectiveness:
We pride ourselves on ease of use. Aprio is a breeze to learn for board administrators and directors. We survey our users annually for input on product enhancements.
Aprio helps organizations large and small to efficiently run board meetings, keep directors up to date, and keep information secure.
Aprio’s full-featured board portal delivers premium features without the premium pricing.
Not all support is as supportive as Aprio’s. We stand out for personalized, practical training for directors and administrations, plus we provide live 24/7 help for when board members need it most.
The Aprio board portal provides layers of advanced security and gives you the power to control access, guarantee compliance, and remotely wipe board data from lost or stolen devices.
Aprio makes it easy to:
We pride ourselves on product innovation. Routine benchmarking against competitors helps ensure our technology and support are the best in the industry, at the best price. Read about Aprio’s cutting edge features including three-step annotations, our built-in survey tool, and our mobile app that make it easier than ever to review, communicate, and prepare for board meetings – anywhere, anytime.
Because technical support is closely tied to efficiency, Aprio offers personalized training and assistance 24/7, including portal setup, admin training, data migration, one-on-one director training, and support during your first board meeting. In fact, your organization could be using Aprio board management software in as little as three weeks.
Our Critic’s Guide will get you started on the path to choosing your best-fit board portal by helping you to assess your needs, compare products, ask the right questions, and build a business case.
Get ready to give your board the boost it needs to reach its full potential. Review our Board Portal Buying Guide and then get in touch with us or book a demo. We look forward to showing you how to take your board to the next level with Aprio.
Next-generation board governance is right ahead of us, and it’s bursting with opportunity.