Closed-loop systems can help committees access sales figures, discuss mergers in secure environments

By Joe Ruck

Although good governance is ultimately predicated on the ethics and expertise of board members, it is obvious to many directors today that there is a crucial role for technology. These directors reject the notion held in certain quarters a few years ago that technology is a panacea. Instead they subscribe to the more mature view that technology is an enabler—a key ingredient for a board environment that is radically different from the one only a few years ago.

Directors today face more duties and committee meetings, closer regulatory scrutiny, and a quickening in the pace of board work. With this qualitative change in the very nature of board work, the value of “always-on” access to board materials has grown evident, first to NYSE-listed corporations, and more recently to NASDAQ companies and nonprofits.

But simple online document access proved insufficient for a demanding boardroom environment.
As companies began to take a more rigorous view of corporate responsibility, it became clear that a broader set of processes would have to be captured, the scope of which includes not only meeting process, but also process that takes place between meetings, particularly written consents, director questionnaires and conferencing.

Today the best portals on the market have the breadth of functionality to address all these requirements and more.

At BoardVantage we have learned that directors focus on three broad themes where technology can make a difference in governance:

• Privacy, discoverability and risk mitigation
• Responsiveness in case of special events
• Visibility into normal operations

Privacy, Discoverability and Risk Mitigation

Effective governance relies upon free and open deliberations among board members to arrive at a conclusion. Privacy is obviously essential for this process and board portals can help here in a number of ways.

Designed with confidentiality as a primary objective, access is restricted only to board members and selected executives. All sensitive information is held within this protective envelope. This eliminates any risk of unauthorized viewing by IT or support staff. Portals provide a closed-loop email system subject to document retention policies, permitting a full and complete purge of individual messages. This allows boards to hold unfettered private discussions without having to worry about how their deliberations might look taken out of context.

Clearly, the board’s final decisions and supporting materials must be preserved, and here is where a board portal’s document retention capabilities can help. General counsels can determine their preferred policy for retention periods and set up rules that will stand up to external scrutiny. This supports any requirement for discovery in a professional and time-sensitive manner.

Further, the most recent portals are able to extend their document retention policies to the locally stored documents on the board members’ laptops, an essential but sometimes ignored part of the puzzle. This is particularly relevant for boards where directors annotate board books prior to meetings.

Responsiveness in the Case of Special Events

Given the unpredictability of external events such as M&A activity, market swings and natural and man-made disasters, it should be expected that circumstances will at some stage dictate the need to schedule an online meeting within 24 hours’ notice and in the same timeframe make all relevant documentation available. Portals include sophisticated alerting functionality to make sure board information is available in a timely fashion. Factor in the mobility of board members and the benefits of electronic distribution become clear.

In practice what often happens without a portal is that companies improvise and make ill-advised trade-offs with readily accessible technologies such as e-mail and fax. Faxes are sometimes sent to the wrong hotel, and in any event will be seen by several hotel staff, all of whom are intelligent enough to understand the significance of an M&A bid. Worse yet is the reliance on regular e-mail, which creates a distributed, permanent and discoverable audit trail beyond the control of the organization. Taken out of context, off-the-cuff e-mail deliberations can be presented in an adverse light.

Visibility into Normal Operations

In sharp contrast to the recent past, board work doesn’t stop when the quarterly meeting ends. Directors are expected to continue the conversation beyond the meeting, but, without a portal, it is not always possible, let alone convenient to communicate hyper-sensitive information in real time. Directors now request routine access to weekly store reports and other sales figures. CEOs publish monthly update letters to their boards. There are self-assessments, and director questionnaires to complete. Executive committees work on succession planning and compensation committees review option grants.

Good portal design makes information access easier than traditional paper-based methods. Current meeting material is a click away while hyper-linking allows scanning of subject headings followed by drilling down, if necessary. Powerful search tools allow directors to retrieve archival documents for benchmarking and automated distribution enables more frequent updates from management without placing an unreasonable burden on the executives responsible. Also, support for two-way communication gives directors a reach that previously wasn’t possible while remote. It’s easy to see that in this “new normal” board environment, portals are a far more effective medium than the old-school paper process.

Any decision is only as good as the quality, timeliness and security of the information upon which it is based. By improving visibility into operations, assuring privacy of deliberation and providing a rapid response capability to geographically dispersed directors, portals can affect all three and therefore the quality of corporate governance.

Joe Ruck is President and CEO of BoardVantage. He has led many high-technology companies through successful growth to IPO and acquisition.