SPECIAL REPORT
Governance Management Solutions Next Generation Governance Management Solutions Governance Management Apps – The Key to Smarter Meetings Board Portal Solutions – Powering the Future Key Factors for the Future of Corporate Governance The Future of Governance Management
Published by Global Business Media
MeetX
Directors Desk
Designed for Boards Designed for Boards and Leadership Teams and Leadership Teams Nasdaq Corporate Solutions’ MeetX and Directors Desk can help streamline meeting process,
Nasdaq Corporate Solutions’ MeetX and Directors Desk can help streamline meeting process, accelerate decision-making and strengthen governance. Used by public, private and non-profit
accelerate decision-making and strengthen governance. Used by public, private and non-profit organizations worldwide, including over half of the Fortune 500, MeetX and Directors Desk
organizations worldwide, including over half of the Fortune 500, MeetX and Directors Desk combine functionality with security, ease-of-use and mobility.
combine functionality with security, ease-of-use and mobility.
To learn more, visit: business.nasdaq.com/intel/board-leadership-solutions To learn more, visit:
Or contact us at: www.business.nasdaq.com/intel/BnL corporatesolutions@nasdaq.com Or contact us at: corporatesolutions@nasdaq.com
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GOVERNANCE MANAGEMENT SOLUTIONS
SPECIAL REPORT
Governance Management Solutions Next Generation Governance Management Solutions Governance Management Apps – The Key to Smarter Meetings
Contents
Board Portal Solutions – Powering the Future Key Factors for the Future of Corporate Governance The Future of Governance Management
Foreword 2 Tom Cropper, Editor
Next Generation Governance Management Solutions 3 Blake Stephenson, Principal Product Manager – Board & Leadership Solutions, Nasdaq Corporate Solutions
Published by Global Business Media
Published by Global Business Media Global Business Media Limited 62 The Street Ashtead Surrey KT21 1AT United Kingdom Switchboard: +44 (0)1737 850 939 Fax: +44 (0)1737 851 952 Email: info@globalbusinessmedia.org Website: www.globalbusinessmedia.org
The Need for Change Board Members are Getting Younger Beyond the Board Collaboration Intelligence, Analytics and Integrated Corporate Workflows
Governance Management Apps – 7 The Key to Smarter Meetings Tom Cropper, Editor
Publisher Kevin Bell
A Waste of Time A Better Way A Growing Marketplace
Editor Tom Cropper
Board Portal Solutions – Powering the Future
Business Development Director Marie-Anne Brooks Senior Project Manager Steve Banks Advertising Executives Michael McCarthy Abigail Coombes Production Manager Paul Davies For further information visit: www.globalbusinessmedia.org The opinions and views expressed in the editorial content in this publication are those of the authors alone and do not necessarily represent the views of any organisation with which they may be associated. Material in advertisements and promotional features may be considered to represent the views of the advertisers and promoters. The views and opinions expressed in this publication do not necessarily express the views of the Publishers or the Editor. While every care has been taken in the preparation of this publication, neither the Publishers nor the Editor are responsible for such opinions and views or for any inaccuracies in the articles.
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Jo Roth, Staff Writer
Technology in Action Making the Transition Making it Work
Key Factors for the Future of Corporate Governance 11 James Butler, Staff Writer
The Problem of Inertia A Gradual Change Cyber Security Planning for the Future
The Future of Governance Management 13 Tom Cropper, Editor
Responsible Capitalism Growing Demand A High-Tech Future
References 15
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GOVERNANCE MANAGEMENT SOLUTIONS
Foreword G
OVERNANCE MANAGEMENT has always
the amount of information available to boards,
been important, but never before has it been
while also ensuring it’s presented in a coherent and
so complicated. Corporate scandals such as Enron
actionable way.
spawned an era of stricter and more demanding
James Butler will then look at the key factors
regulations – dramatically increasing the amount of
to consider when planning future governance
information a board needs to keep track of.
management strategies, before we cast our eye
Our opening article comes from Blake Stephenson,
to the future. We’ll look at how governance is
Principal Product Manager, Board and Leadership
changing. A drive towards a more responsible form
Solutions for Nasdaq Corporate Solutions. He
of capitalism will continue to place greater demands
describes how compliance has evolved and why
for transparency and accountability. Boards will have
board management has become an increasingly
to factor in key issues such as sustainability and
vital business proposition. New technology will
customer engagement along with profit and loss as
play an important part in the future, particularly
part of their critical performance data.
board portal software. These streamline important
The future for the market looks promising as
processes and increase the amount of information
businesses continue to seek ways to streamline
at a board’s fingertips.
processes, increase the amount of available
We will then look at some of the specific ways in
information and demonstrate regulatory compliance.
which new governance management technologies
Integrating technology into processes can help
are making a difference. Firstly, we’ll examine the
businesses stay ahead of an increasingly competitive
way in which portable software platforms can
and demanding game.
streamline the entire meeting process, creating a ripple effect of time savings throughout the organization. Jo Roth will then look specifically at board portal management solutions. These dramatically increase
Tom Cropper Editor
Tom Cropper has produced articles and reports on various aspects of global business over the past 15 years. He has also worked as a copywriter for some of the largest corporations in the world, including ING, KPMG and the World Wildlife Fund.
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GOVERNANCE MANAGEMENT SOLUTIONS
Next Generation Governance Management Solutions Blake Stephenson, Principal Product Manager – Board & Leadership Solutions, Nasdaq Corporate Solutions
G
OVERNANCE MANAGEMENT has been necessary for as long as there have been boards with company directors requiring co-ordination, counsel and support, as well as a need to record the decisions made. Directors have always needed information to inform those decisions, but being able to efficiently and securely compile and manage that information may have been a challenge – think of the paper board pack printed and left, accidentally, in the back of the taxi.
The Need for Change Having been rocked by the likes of the Enron and WorldCom scandals, policy makers took to developing new rules and boards found they had expanded responsibilities and became overloaded with information in order to make informed decisions. As rules and regulations developed, and as the size and complexity of corporations and corporate governance requirements increased, so the length and complexity of board materials and meetings followed. Inefficiencies became apparent and technology stepped-in with the development of web-based board portal software designed with a primary objective in mind – within this regulatory context – to enable the company secretary managing boards to more quickly and efficiently distribute meeting materials in an environment with built-in security features. In short, to speed up information flows to board members as workloads intensified and as priorities shifted quickly. One of the key drivers was the SarbanesOxley Act of 2002, with its tougher standards for public company boards. The board portal innovations that followed were a success, particularly with U.S. public companies who were enthusiastic and the earliest adopters of these solutions. By the mid-2000s board administration processes were increasingly automated and more secure but directors – perhaps because of demographics – remained wedded to paper and more traditional ways of working.
The lack of director adoption was one of the biggest challenges faced by providers, but the release of the Apple iPad in 2010 and board portal apps thereafter changed the information landscape. As directors gradually took to mobile devices, the full benefits of electronic board books were beginning to be realized. Producers (company secretaries and board administrators) had a means to distribute materials swiftly, with security safeguards, and also the consumers (directors) were able to view their materials on the go, anytime and anywhere. The time savings were increasingly evident, and are reflected in the growth of the board portal market. However, even progressive boards that have gone digital might still experience a director or two that wants to rely on paper copies – updated manually and couriered at cost – and so the journey towards the paperless boardroom continues. We expect the take-up of electronic board solutions by individuals to continue to grow and accelerate as board members rotate, and as the next generation, more accustomed to working digitally, on the go and at any time, join boards. Board refreshment has been a topical issue for some time. Much of the focus as regards diversity has been on gender, but there’s also a credible argument being made for much younger boards. We’re entering a new era where, by 2020, half the global workforce will comprise of millennials1 and the way they communicate differs significantly from those currently occupying board seats. Companies will need to consider how they do business, and it’ll perhaps take some younger minds working and voices heard at the top to achieve this. There won’t be a change overnight to the average age of directors, and nor should there be – the value of experience is similarly important – but there’s certainly a long-term trend to watch. Just as technology innovation is shaking up the retail experience, for example, to align with the expectations of younger buyers, so too, younger boards will drive significant technology innovations that cater for their own new ways of working.
Even progressive boards that have gone digital might still experience a director or two that wants to rely on paper copies – updated manually and couriered at cost – and so the journey towards the paperless boardroom continues
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DIRECTORS DESK AND MEETX: DESIGNED FOR BOARDS AND LEADERSHIP TEAMS
As existing directors are replaced by those coming through the midand 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
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Board Members are Getting Younger Regardless of this longer-term trend, 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. 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. This is an important trend, evident in the more mature markets – those that are well on the way to embracing technology solutions for board management, however – In the shorter-term, we also expect further advancements in corporate governance rules or regulations to play the key role in the take-up of board portal solutions in less mature markets, and in un-listed but regulated organizations. Early markets for digital board management were typically the listed companies in the U.S., some of the European economies – for example, the United Kingdom, the Nordic countries and Western Continental Europe – and Australia. But here, too, there has been increasing demand for board solutions outside of the listed corporates, in particular in certain regulated sectors such as finance, where it’s necessary to ensure regulatory expectations – of which good corporate governance practices is a top priority – are satisfied. A significant response to the most recent global financial crisis has been the regulatory focus on corporate governance failings, and
the competence, capabilities and diligence of directors and senior managers is certainly in the spotlight. The use of technology to evidence such compliance is increasingly commonplace. Take for example the need in some circumstances to demonstrate compliance with the UK Senior Managers Regime2 – a regulatory development where governance technology solutions can feasibly step-in and support the burden of tracking senior manager qualifications, electronically approving and recording statements of responsibilities, and recording material decisions that have been taken. Board portal technology used by corporates outside of these more mature regions however, remains relatively low – and with such a high proportion of the total number of listed companies globally listed in the more mature and intensively regulated markets, this is perhaps not surprising. As less mature markets catch up and focus on regulatory compliance, however, it’s likely that companies here will also reach for technology solutions to support their work flows, ensure compliance, and retain governance documents to evidence that directors or senior managers are discharging their duties adequately. In less mature markets - whether listed or un-listed - digital board management is starting to be viewed, we believe, as essential rather than a luxury. As the rules and regulations that influenced the development of those first web-based board portals are amended, board solution providers will keep a close eye on these and continue to innovate – as we’re doing at Nasdaq Corporate Solutions – to continue to serve the needs of clients. Regulatory change, however, is not the only driver for innovation.
GOVERNANCE MANAGEMENT SOLUTIONS
Beyond the Board
Collaboration
To date, board portals have focused on providing ease of use for the board and board administrators, but usage within organizations is growing and we expect many more use cases to surface with significant vertical expansion. Board portal technology has been a successful and high growth market. The market is now moving out of this niche position and into a broader leadership collaboration and communication segment, with its many use cases and a larger addressable global market. As executives continue to attend board meetings and access their meeting materials through the board portal technology, they recognize the potential benefits the technology can provide to their own teams – big or small, local or global. Clients using Directors Desk and MeetX products do so to manage their board and its committees, subsidiary boards globally, as well as country and divisional leadership teams globally – segregating content and access by committee or team, and on the individual user level. Systems that are agnostic as to the types of meetings and users, and which are flexible and scalable, are enabling significant vertical expansion through organizations and are driving administrative efficiencies. And, while some of the virtual data rooms or cloud storage solutions might at first appear to be attractive for this same purpose, board portal technology is built to specifically address corporate governance process, information sharing requirements and concerns about security. Having focused on the boardroom for many years, this balance is in the DNA of board portal providers with a focus on good corporate governance, like Nasdaq Corporate Solutions.
In its many forms – whether sharing and editing documents in native format, sharing annotations, chatting and discussions, signing documents or formal approval workflows – governance solutions are taking director and management team-working to the next level. The way leaders work continues to evolve, and technology solutions are evolving too. For the board room, the administrator has typically been a producer of content within a board portal and the director has simply been a consumer of that material – commonly not much more than the board book itself. Now, executives and other senior management are increasingly operating their own team spaces to co-ordinate their teams and projects, for example a global management team or an M&A project including outside interaction with external Counsel, consultancy support and financial advisors. In these scenarios, the demand to collaborate and share sensitive information in a protected environment is increasing, and we see this as a significant trend. Nasdaq Corporate Solutions is doing some really exciting things to evolve board and leadership solutions. Dean Oligino, AVP and Product Manager – Nasdaq Corporate Solutions, notes that “next generation solutions will focus on streamlining corporate collaborations to support accelerated decision making and in turn stronger governance and management practices. Moving beyond the board, we are embracing new technology across mobile, chat, and voice to facilitate collaboration for a more diverse set of users”.
Nasdaq Corporate Solutions offers assets available to help manage such a complex corporate environment. Next-generation governance will benefit from these assets being brought together in a single platform to seamlessly connect corporate leaders and directors with one another in new and innovative ways
MEETX: PRODUCTIVITY IN MEETINGS AND BETWEEN
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GOVERNANCE MANAGEMENT SOLUTIONS
EVOLUTION OF THE INTEGRATED NASDAQ INSIGHT PLATFORM
Intelligence, Analytics and Integrated Corporate Workflows
The demand to collaborate and share sensitive information in a protected environment is increasing, and we see this as a significant trend
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Bringing together powerful financial data, knowing who is influencing your stock, getting your message out, and ensuring seamless transparency with the board. Corporates remain overloaded with information and with the pace of information growth certainly not slowing - particularly given the continued trend towards more intense regulations – there is a need now more than ever, not just to ensure processes are efficient but to make proper sense of the information presented. Just as regulation and information overload influenced organizations to go digital with a board portal in those early days, these same drivers are still influencing further and exciting technology innovations. Making proper sense of all the information available is critical to ensure decisions are well informed, and Nasdaq Corporate Solutions offers assets available to help manage such a complex corporate environment. Next-generation governance will benefit from these assets being brought together in a single platform to seamlessly connect corporate leaders and directors with one another in new and innovative ways. Corporate clients now see a world in which technology comes together to provide onestop easy access to intelligence and analytics across departments, for example in relation to Investor Relations, Public Relations and Communications, with leadership collaboration and management workflows supported all the way up to the board. As noted by Joan Conley, SVP and Corporate Secretary – Nasdaq, Inc., “the responsibilities of directors and corporate leaders have never been greater, and the need for quality data to inform decision-making is critical. Technology that brings meaningful data and other intelligence
together in a simple and meaningful way will take governance management to the next level – encouraging management and team collaboration, and ensuring a seamless and increasingly real-time flow of information to, and interaction with, the board directors in an environment designed to manage and share sensitive information”. Blake Stephenson – Since joining Nasdaq in 2013 and before joining the Board & Leadership management team in 2015, Blake was the Associate General Counsel in London, ensuring regulatory and governance compliance for Nasdaq’s London interests. Blake currently serves as company director for a number of Nasdaq’s subsidiary companies in the UK. After being called to the English Bar in 2007, Blake has held governance, risk and compliance roles and has had a particular focus in regulatory compliance and good governance in UK markets infrastructure. His experience in this regard is from SIX Swiss Exchange and the UK’s Financial Services Authority (now Financial Conduct Authority), where he supervised the London Stock Exchange Group. Blake also spent time as an advocate towards the European political institutions while working at the Futures and Options Association (now FIA Europe). In addition to being called to the Bar, Blake has a degree with honours from the University of Kent, Canterbury, a Graduate Diploma in Law and a CISI Diploma in Investment Compliance.
Contact For more information, visit: business.nasdaq.com/intel/board-leadership-solutions
Or contact us at: corporatesolutions@nasdaq.com
GOVERNANCE MANAGEMENT SOLUTIONS
Governance Management Apps – The Key to Smarter Meetings Tom Cropper, Editor How the next generation of governance management solutions can revolutionize the meeting process.
T
IME IS the most precious resource of a business, but it’s something many routinely waste. The result is poor productivity, additional expense and reduced efficiency. Nowhere is this more serious than with meetings. Every year, organizations around the world lose thousands of man hours, with staff being taken away from more important matters. However, the latest generation of governance management solutions can help.
A Waste of Time Few workers relish the weekly meeting; a recent survey found that 46% of workers feel that at least some of their meetings are a waste of time3. While few would say meetings are unnecessary altogether, they are often too long and too frequent. Indeed, a recent report suggests they may waste even more time than most people think. An exercise by three consultants from Bain, in which they analyzed the Outlook schedules of employees in an unnamed large company, found that one weekly executive meeting contributed to 300,000 lost hours every year. That’s an enormous amount of time, but they justify that figure by pointing to the knock-on effects of each meeting. First, the meeting itself consumes a total of 7,000 hours for each of the executives involved. To prepare for that meeting, though, they had to meet with unit heads which accounts for 20,000 lost hours; those unit heads prepared for those meetings by meeting with their own teams, eating up 63,000 hours and each of those meetings generated a multitude of other preparatory meetings which ate up 210,000 hours, bringing us to a grand total of 300,0004 lost hours. That figure seems high, but the consultants claim it underplays the full extent of the interruption. Their study does not account for all the other
preparatory work done by each individual. For example, secretaries or administrators would have to spend time compiling hundreds of pages of documents, printing them and sending them out. That creates problems with an enormous waste of paper and possible security concerns. Board packs sent out by post are liable to be lost or mislaid. Documents sent through potentially insecure email accounts are also vulnerable. The traditional meeting is, therefore, wasteful, inefficient and expensive creating a ripple effect of disruption which moves throughout an organization. The bigger, the company the bigger this ripple effect will be. But there are alternatives. As so often, the answer lies in technology.
Few workers relish the weekly meeting; a recent survey found that 46% of workers feel that at least some of their meetings are a waste of time
A Better Way Corporations have been looking to digital technology ever since the internet first came into being. Early solutions were relatively limited and complicated to use. Consumer-grade file sharing solutions such as DropBox and GoogleDocs have become a popular way to share and collaborate on one central document, but they still don’t quite offer the fully connected experience boards are looking for. They are relatively insecure and can do little more than share documents. Businesses need specialist apps which offer instant access and a host of dynamic collaboration tools. Here the challenge is to produce the most secure, intuitive, accessible and flexible solution possible in a bid to help companies create a truly paperless meeting process. One example comes with MeetX developed by Boardvantage, now a part of Nasdaq. This is an easy to use app designed to streamline meetings and distribute key information more securely. When attending a meeting, a user can go to their ‘meeting center’ where they can view and download all the relevant documentation for WWW.CEOREPORTS.COM | 7
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Audio meeting software and Skype are great at allowing people to listen in from remote locations, but it can still be difficult to follow presentations and to take a truly active part in proceedings
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each meeting. They can scroll through them and quickly make comments which are then shared with the entire team. There’s no need to print out documents for the meeting or to print out replacements once changes have been made. Users can view documents from past meetings and again make any changes they need. MeetX also allows them to attend remote meetings. Workers are becoming more mobile which means a typical meeting might include people from various locations around the world. Audio meeting software and Skype are great at allowing people to listen in from remote locations, but it can still be difficult to follow presentations and to take a truly active part in proceedings. The MeetX software allows users to join a meeting remotely. They can surrender control of their screen to the lead presenter which allows them to see documents and presentations as and when they are shared. When their turn comes to speak, they can take control of the meeting at which point their own screens are shared with the group.
A Growing Marketplace This is just one piece of software in what is a rapidly growing and emerging market. A report from Global Markets Insights expects the market for collaboration software to grow by 13% CAGR between 2016 and 2024 to exceed $8.5bn5. The technology is developing fast with the leading systems continually downloading and installing new updates to their platforms. Competition is driving innovation with many developers moving into this space. Some are better than others which is why buyers will need to think carefully about each purchase before making a final buying decision. However, governance management has already done much to prove its worth. By digitizing the board meeting pack, these systems save huge amounts of paper. Better communications between teams makes it easier to prepare, while the ability to quickly view documents and minutes makes it easier to keep track of decisions which have been made. They offer a way to create a high-tech solution for a modern business world.
GOVERNANCE MANAGEMENT SOLUTIONS
Board Portal Solutions – Powering the Future Jo Roth, Staff Writer When implemented correctly, digital board management systems have the potential to streamline meeting processes more efficiently.
E
VERY NOW and again, a piece of technology comes along which promises a transformative leap forward for businesses. When it does, businesses greet it with a mix of enthusiasm, skepticism and confusion. We’ve reached such a point with board management software. The latest generation of management software offers all sorts of benefits to businesses. It can streamline operations, enhance visibility, reduce administration and facilitate regulatory compliance. At the same time, though, it represents a significant culture shift. New systems can seem complicated and hard to understand. Any organization will present some resistance to change – particularly if existing systems are seen to have been functioning adequately. Some businesses may naturally wonder if it represents a good fit for them. For example, a large multinational corporation needing to coordinate between multiple departments, will quickly see the benefits. On the other hand, a smaller business, with relatively few employees, may take more convincing. If business as normal works, why change? The challenge for developers is to demonstrate the added value they bring, while managers will need to assess how a new system works and how it can be incorporated into existing systems.
Technology in Action A good example of the latest generation of technologies is Directors Desk, a piece of board portal software which has been specifically designed for board leadership teams to provide greater governance management, insight and collaboration across the organization. It can be used at various levels. Secretaries and administrators can distribute board materials more effectively and streamline the management of meetings. Directors and leadership teams can use a PC or tablet to log directly into their account to download the latest documents, make and share annotations,
vote on key issues and manage tasks. They can share information and communicate with partners via the platform anywhere in the world. It also helps companies move towards the paperless boardroom – the attempt to take all the documents and paperwork and transfer them into the digital environment. The benefits can be immense. They can slash the amount of paper a business uses, saving money and improving the organization’s carbon footprint; they can save time and effort in the preparation and management of meetings and free up staff for more profitable and productive tasks. Take the example of Points International, a global leader in loyalty currency management. In the run up to meetings, their company secretary would have to compile 150 to 300 pages per meeting and then choose between shipping the documents or sending in a large PDF by a potentially insecure email. Updating the documents meant they needed to be reprinted and distributed leading to yet more waste. The Directors Desk Portal enables the secretary to share documents through the portal with all relevant stakeholders. Any updates can be made and updated through the system, cuttingdown on paper and duplicate copies. Key to all this is the secure interface of the server, enabling the company to distribute highly sensitive and important company information across the organization. This has been particularly important with end of year audits. The Digital Rights Management Feature enables the company to share highly sensitive information safely and securely within the organization. “Whether there was a need to share due diligence material for an acquisition or simply allow permission for a smaller group to conduct the annual Auditor’s assessment, Directors Desk offers the appropriate toolset to execute securely with the Board,” said Anthony Lam CEO of Points.
The latest generation of management software offers all sorts of benefits to businesses. It can streamline operations, enhance visibility, reduce administration and facilitate regulatory compliance
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The Directors Desk Portal enables the secretary to share documents through the portal with all relevant stakeholders
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Making the Transition
Making it Work
For all these benefits, though, transitioning to the paperless boardroom represents an enormous challenge. There are numerous issues to overcome: • Initial expenses: Moving to a new system brings new costs. There will be the initial expense of buying the solution as well as all relevant equipment. Additionally, there is the expense of buying smartphones, tablets or PCs for each member of staff. Some businesses may consider encouraging employees to bring their own devices to work, but this can leave data vulnerable. •S ecurity: Any use of digital technologies creates potential security concerns. Devices can be lost or mislaid, systems can be hacked. Former employees whose access has not been denied might still have access to their accounts. •C ompatibility: A new system may not be compatible with existing infrastructure. Equally, different people prefer different makes of tablets and smartphones. Systems will need to be compatible with a range of different operating systems to ensure access for all. •S taff training: Perhaps the biggest obstacle will be the learning curve all staff will have to undergo. People get used to working in a certain way and can react negatively when that comfortable situation comes under threat. Adoption may not be an entirely seamless process. A new system may encounter glitches as employees get used to working with it. For Points International, staff training had been one of their biggest concerns, as Lam admits. “Our biggest concern with the solution was ramp-up time and adoption rate,” he says. However, adoption was smoother than he thought. “To our surprise, after some light training, our board members ended up adopting the platform much faster than anticipated.”
The transition worked well for Points, partly because they were well prepared, but also because the system is designed to be intuitive and accessible. Furthermore, ongoing support from the developer can play an important role in the smooth introduction of new technology. Before adopting new board management systems, then, buyers will need to think about all the potential obstacles highlighted. They will need to look at the initial cost, but also think about how much they will save in the long run – not only through paper, but also administrative time. Reduced administration will also reduce the amount of money they spend on unproductive tasks and increase the amount of strategic planning which can drive profitability. They must look at the compatibility of the system – both with their existing infrastructure and with the mobile devices already in use. Leading systems try to be as accessible as possible, working across multiple platforms and operating systems. Managers will have to know which systems any new solution can work on. Last but not least, security. The best systems come with the latest protection providing a highly secure network. In most cases this will improve upon existing infrastructure, but it pays to work with any supplier to understand exactly what precautions have been undertaken. A failure to comprehend how software systems are secured is one of the most common ways in which businesses leave themselves vulnerable. Digital is the future, but it’s a future not every company has yet grasped. That creates an opportunity for competitive advantage. By switching to digital board management systems, businesses can save money while streamlining operations and giving directors the tools to make better decisions based on more relevant data. Those still working with paper-based boardroom packs risk being left behind.
GOVERNANCE MANAGEMENT SOLUTIONS
Key Factors for the Future of Corporate Governance James Butler, Staff Writer New thinking and new technologies hold the key to the future of corporate governance.
As previous articles in this Report have shown, the next generation of board management solutions has enormous potential for businesses of all sizes. Even so, they are some way from achieving universal market penetration. Many companies continue to press on with outdated technologies and practices - so what’s holding it up and what must a business do to ensure a smooth implementation?
The Problem of Inertia The biggest problem could simply be inertia. Businesses and professionals become used to working in certain ways and, when change comes, they instinctively push back. If existing practices have been seen to function well in the past, it will be difficult to convince departments to make a change. The larger the company, the more ingrained processes can be and the more difficult it is to implement organization-wide change. Some professionals may also dislike working in the digital environment and insist on using traditional paper-based methods. This is a particularly high risk with boards which have a high incumbency rate. Executive search Firm’s Spencer Stuart’s Board index for 2017, showed a small decline in board turnover with only 345 new members elected to boards compared to 376 in 20156. Many boards are now raising their retirement age and, as Bloomberg reports, the average age of directors has risen to just over 63 from 60 in 19987. Age and experience will always be an asset, but it can make it difficult to embrace new technologies and ways of thinking, particularly as the wider workforce outside of the board is getting younger and works in a different way. A new generation of employee is beginning to dominate the workforce – one brought up with digital technology. Today, almost half of workers are classified as millennials. This tech savvy generation has different ways of working and developing their skills. Increasingly they have new technological
solutions available to help them work in the way they want to. Boards which fail to bring in fresh blood or recognize how workplace demographics and practices are shifting risk being left behind. Investors are increasingly turning their attention to board composition rather than pay. That was not always the case. After the financial crisis in 2008, the business world experienced what some termed the ‘shareholder spring’ which featured calls for a greater say on executive pay. However, while compensation remains a strong factor, attention is turning towards who is on the board, rather than how much they get paid. The experience and expertise older board members have will always be crucial to the fortunes of any business. However, they are increasingly becoming isolated from the way the rest of the business works, which is why a smart company is one which injects younger talent at board level.
The latest Government Security Breaches Survey found that 74% of small business organizations reported a security breach of some kind within the past year
A Gradual Change The best way to implement change is to take small, gradual steps. Not only will this help to iron out any glitches, but it also demonstrates value at an early stage. For example, if one department makes the switch to a digital board portal they can serve as a testing ground. Other departments can see how it works and what benefits they are getting. If there are problems with the implementation, businesses can assess what went wrong and how similar problems can be avoided in the future. This will depend on close collaboration with the developer. They will need to show how their solutions can address the key challenges of a board and work with a company’s existing IT infrastructure. They will be there to offer ongoing technical support and help with the training of key personnel. In this environment, simplicity will be key. Platforms which are intuitive and easy to use with minimal tuition will face the lowest barriers to implementation. WWW.CEOREPORTS.COM | 11
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Cyber Security
Boards which fail to bring in fresh blood or recognize how workplace demographics and practices are shifting risk being left behind
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The rise of digital board management solutions and big data coincides with an increase in cyber-crime. The more data a business gathers, and the more they store it in the digital landscape, the more vulnerable they are to potential data leaks and security threats. A report in 2016, released by Get Safe Online, estimated that cyber-crime had cost UK businesses more than £1bn over the course of the preceding year8. Furthermore, the threat is moving from larger corporations to SMEs, which might not previously have been the subject of cyber attacks. They are seen as soft targets – they are using digital technology, but not taking necessary precautions for the simple reason they do not see themselves as targets. Awareness is low – both of the true threat level and available countermeasures. The latest Government Security Breaches Survey found that 74% of small business organizations reported a security breach of some kind within the past year9. However, cybercrime is by no means the only threat. A study from Intel revealed that almost half of data leaks came from employees10. Future corporate governance strategies will have to include extensive staff
education and clear practices outlining precisely who has access to which parts of the system, as well as contingency plans in case a system is compromised. The threat of cybercrime is one factor which can encourage further adoption of specialist board management solutions. These come with tight security protocols enabling organizations to share information across highly secure digital networks.
Planning for the Future As teams install and implement new systems, they must also plan for the future. The landscape is moving quickly – both in terms of regulations and technology. Businesses can do much more and analyze ever-increasing amounts of data. That could be critical to business performance in an increasingly competitive world. But having clear access to data also helps cope with the changeable nature of the regulatory environment. When installing a system for today, managers must also keep an eye open for the future. It’s hard to predict, but a system which can react to change and easily incorporate updates and improvements will be crucial for the future health of an organization.
GOVERNANCE MANAGEMENT SOLUTIONS
The Future of Governance Management Tom Cropper, Editor Corporate governance is full of challenges, complexity and opportunity. The next generation of governance management solutions can hold the key to a more prosperous future.
I
T WAS an undeniably bold speech. In front of the world’s political and business elite at Davos, Britain’s new Prime Minister Theresa May stood up and promoted the idea of a new approach to business both governments and the corporate world to ensure that as many people as possible benefit from free trade11. Businesses, she said, should be more accountable and more transparent – so what will this new age of transparency mean for the corporate world?
Responsible Capitalism The call for a more responsible approach to capitalism comes at a time when public trust in corporate structures is at an all-time low. Edelman’s most recent trust barometer signaled a deep crisis of trust in all institutions – government, media, NGOs and corporations. Only 33% of people trust UK businesses – down from 45% the year before12. Trust has been a major issue for the corporate world ever since the high-profile scandals of the 2000s. Those crises sparked a renewed spate of corporate regulation such as Sarbanes-Oxley, dedicated to producing greater transparency in corporate reporting. Since then, governance has played an increasingly important role as regulations become stricter and more sweeping, and the signs are it will continue to do so. Theresa May’s drive to reform capitalism has been accompanied by the establishment of a Parliamentary Select Committee to conduct a corporate governance enquiry, suggesting the regulatory landscape will shift in the future. Edelman’s Trust Barometer also suggests corporations have much to do if they are to restore public faith. However, there is good news. The report suggests trust can be restored if businesses begin to act in a more positive way. Both regulatory and public pressures will continue to push corporate governance forward over the next few years. Businesses will be
gathering and presenting an ever-increasing range of information. In a world in which scrutiny is intense, the temptation will be to over – rather than under – report, resulting in a deluge of information. Digital reporting tools will make it faster and easier to produce more information, but that could hinder transparency. A recent briefing from Ethical Corporation, Matt Peacock, Group Director of Corporate Affairs at Vodafone warned of a snowstorm of data: “The problem with continuous disclosure is you can actually become less transparent by becoming too transparent, in a perverse way,” he said. “The risk is that you produce a snowstorm of data13.” We’re also likely to see an increase in sustainability reporting. The business world has made significant strides in recent years with most major companies now routinely disclosing details of their impact on the environment. KPMG’s survey of corporate responsibility reporting14 found that almost all of the 250 major firms they surveyed routinely report on corporate responsibility. However, there is much more to do and businesses will be under pressure to be more dynamic in the way they measure and manage their impact. Today, the technology exists to help them do that. High-tech corporate governance management software can dramatically increase the amount of data which can be gathered and presented in a more intuitive way. This may contribute to a change in the way businesses measure success, as a report into the future of corporate governance by the World Economic Forum says. “Large corporations can and should play a significant role in how we deal with social and environmental issues,” it states. “To do this, however, they need to focus on building long-term value for all stakeholders rather than focusing on delivering short-term returns to shareholders.15”
Prime Minister Theresa May stood up and promoted the idea of a new approach to business both governments and the corporate world to ensure that as many people as possible benefit from free trade
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The business world has made significant strides in recent years with most major companies now routinely disclosing details of their impact on the environment This, the report states, could result in a change in how corporations measure business success. The corporate world is often criticized for prioritizing short term gains over long term sustainability. That’s partly because short term profit or loss is much easier to visualize and quantify. Governance management solutions can drill down into the data giving directors a much more comprehensive view of business performance. This can potentially produce clear data, which makes a much more convincing business case for sustainability.
Growing Demand Such trends, therefore, are likely to encourage rapid growth of high tech board portal software solutions. Between 2011 and 2015 the market grew at approximately 37.50% CAGR16, according to a study from Reports ‘n’ Reports, but that’s nothing compared with what the future holds. The same report predicts a CAGR of 44.80% between 2016 and 2021 with companies looking to increase transparency, improve IT infrastructure, avoid data breaches, and cope with business expansion. Demand is being driven by several factors: • The need to improve IT infrastructure: especially in areas such as healthcare and education where operations have previously lagged other sectors in terms of how well they make use of technology. •A need for improved governance: Maintaining oversight of business operations is crucial for regulatory compliance and to improve the accuracy and usefulness of key business metrics. •A wareness: Top level executives are becoming more aware of the available board portal solutions and the benefits software can bring. As more and more businesses take up solutions, they are generating a host of case studies which prove the return on investment. •C ommunications: Communications between board members need to be quicker to reduce administrative burden and to increase the speed of decision making. 14 | WWW.CEOREPORTS.COM
North America is expected to lead the way followed by Europe and Asia. There is huge growth potential within the UK, French and German private sectors. Emerging economies such as South Korea, China, Japan and India are also expected to see rapid growth.
A High-Tech Future Technology will have a major impact. Digital Board Portals have already had a considerable influence, but technology can potentially push far beyond. Over the next few years, businesses could be harnessing the power of technologies such as augmented reality or the blockchain to produce yet more value from their governance strategies. The blockchain is the technology underpinning Bitcoin. It is open source and represents a record of digital events which is shared among several participants. It can only be updated once a majority of participants agree and, once entered, this information can never be erased. For example, the blockchain contains an indelible record of every bitcoin transaction ever made. A large organization potentially could harness the blockchain technology to create an online voting system – one which is highly secure, difficult to manipulate and will leave a lasting record. Augmented and virtual reality technologies could make it easier for board participants to view digital information in real time during a meeting, and to attend remote meetings. It would be possible, for example, to hold a ‘physical’ meeting in a virtual space between board members based in numerous separate locations, instantly viewing and sharing any documentation among all participants. Technology has taken governance management a long way over the last few years, but as even a quick glance into the future suggests, there is much more to come. Board portal systems still have plenty of potential for development – both in the scope of their market and the sophistication of the technology.
GOVERNANCE MANAGEMENT SOLUTIONS
References: Goldman Sachs Global Investment Research, at http://www.goldmansachs.com/our-thinking/pages/millennials/
1
2
The UK Senior Managers Regime applies to ‘relevant authorized persons’ and aims to raise standards of governance, increase individual accountability and help restore confidence in the banking sector.
3
It’s Official. Half of Your Meetings are a Waste of Time http://www.inc.com/minda-zetlin/its-official-half-your-meetings-are-a-waste-of-time-.html
4
This Weekly Meeting Took up 300,000 Hours: https://hbr.org/2014/04/how-a-weekly-meeting-took-up-300000-hours-a-year
5
Collaboration Software Market Size: https://www.gminsights.com/industry-analysis/collaboration-software-market
6
Spencer Stuart Trust Index: https://www.spencerstuart.com/research-and-insight/spencer-stuart-board-index-2016
7
Boards Should Not Be Retirement Homes: https://www.bloomberg.com/view/articles/2015-01-26/u-s-corporate-directors-are-getting-old
8
Cyber Crime Costs UK Businesses More than £1bn per year:
http://www.computerweekly.com/news/450298242/Cyber-crime-cost-UK-business-more-than-1bn-in-the-past-year 9
Government Urges Businesses to Take Action as Cost of Cyber Security Doubles:
https://www.gov.uk/government/news/government-urges-business-to-take-action-as-cost-of-cyber-security-breaches-doubles 10
External Hackers and Internal Employees Pose Data Breach threat:
https://www.scmagazine.com/external-hackers-and-internal-employees-pose-data-breach-threat/article/533602/ 11
Theresa May Declares Brexit Will Make a Truly Global Britain:
http://www.telegraph.co.uk/business/2017/01/19/theresa-may-declares-brexit-will-make-truly-global-britain-davos/ 12
Edelman Trust Barometer 2017: https://www.edelman.co.uk/wp-content/uploads/UK-TB-2017.pdf
13
Build Trust in a Digital World: http://bit.ly/2koLVfr
14
KPGM Survey of Corporate Responsibility:
https://home.kpmg.com/xx/en/home/insights/2015/11/kpmg-international-survey-of-corporate-responsibility-reporting-2015.html 15
The Future of Corporate Governance: https://www.weforum.org/agenda/2013/11/the-future-of-corporate-governance/
16
Board Portal Market: http://www.prnewswire.com/news-releases/board-portal-market-continues-to-grow-at-44-cagr-to-2021-579078281.html
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Notes:
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