BOARDROOM BEST PRACTICES

Board Governance and Its Impact on Performance

High-performing boards with good governance really do make an impact on the bottom line. Research by management consultancy McKinsey found that “boards with better dynamics and processes report stronger financial performance at the companies they serve”. However, the study also found that boards find developing robust and effective governance processes particularly difficult and can struggle to make the changes needed.

In the drive to improve board performance and boost corporate productivity, many organisations are reviewing governance processes and the infrastructure that supports them to understand whether they adequately provide the competitive advantage and robust compliance needed in today’s challenging regulatory and economic environment. The concept of modern governance is gaining traction, as organisations analyse how they can bring technology into the mix to digitise board governance processes and help directors to perform better, make fully informed decisions and offer the right degree of challenge to management.

It is not just the board that feels the impact of revising governance infrastructure. The board ecosystem is large and encompasses functions that support the board directly, such as the corporate secretariat, legal and compliance teams, as well as impacting all departments that provide reports to the board. Adopting secure, digitised processes and infrastructure for information-sharing and governance also improves efficiency throughout this ecosystem. Below are some of the board governance processes whose digitisation positively impacts board – and business – performance.

Better board meeting preparation and director collaboration boosts productivity

Ensuring that information flows easily and accurately to directors is key to them being fully informed and prepared for board meetings, but the process for achieving this can be anything but straightforward. Collecting reports, assembling board packs, and distributing them to directors has historically been a time-consuming activity that weighs heavily on the corporate secretariat. Late papers or last-minute changes translate to long hours spent revising packs and reissuing them – if there is time to reissue them at all. Paper-based board packs or PDF documents offer limited options for late alterations, meaning that directors can arrive at the meeting without the most up-to-date information.

Collaboration is another challenge. In today’s dynamic environment, it is more important than ever that directors can work together outside the confines of the board room. But at the same time, the sensitive nature of those topics means they shouldn’t be discussed through insecure channels such as email.

A secure online board portal supported with a dedicated director messaging system efficiently resolves these problems. Board administrators can quickly build and share board books that directors access whenever they need to from any location; any last-minute changes are easily made. Directors can make notes and share information within the board portal and send messages to one another through the secure channel. Together, these practices ensure that they arrive at board meetings fully prepared and informed on the topics to be discussed.

Electronic evaluations add rigorous insight

As the famous quote from management guru Peter Drucker goes, “You can’t improve what you can’t measure,” and board performance is a case in point. Regular board evaluations are foundational to good governance, providing an opportunity to assess director and committee effectiveness and board dynamics, as well as a health check on whether the board possesses the right skills and expertise to provide the strategic oversight to the business.

Using a digital solution to conduct board evaluations provides numerous benefits for directors and administrators, the most immediate of which is the time saved compared to manually collecting and compiling evaluation survey responses for analysis. A digital solution such as Diligent Evaluations collects director responses through an online survey and provides immediate data for analysis and automatic reporting at the click of a button. This easy access to data allows the board and corporate secretariat to quickly identify issues that need to be addressed and make sure that the board is strategically aligned with the needs of the business.

From the director’s perspective, completing an online survey is fast and straightforward. Its simplicity means organisations can take more regular opportunities to survey the board and reflect on the outcomes, without trespassing heavily on directors’ time.

Digitising annual D&O questionnaires enhances efficiency

Conflict of interest reporting, also known as Directors and Officers questionnaires, is another key board governance process that has historically been time-consuming and resource-intensive. Administrators had to compile weighty information packets, send them out and wait – often weeks – for directors to return the signed forms confirming their position.

By digitising this process, administrators can assist directors by pre-populating questionnaires with the previous year’s information, so directors simply need to review and verify that it remains accurate, or make any changes needed. The data is always easily accessible should it be needed for audit and compliance purposes.

Global internet group Naspers recently made the switch from hard copy to digital D&O questionnaires. Junior Assistant Company Secretary Lynne Simons appreciates the time saved and convenience of the digital solution, and directors are positive about it: “It’s so much easier than having to send a printed document to them where they have to write in their changes or send us the changes they want us to make. Directors recognise that we’re trying to save them time and make it more convenient for them. They just have to click their response and submit,” she says.

Succession planning – prioritising diversity and widening the recruitment pool

One of the most essential elements of a strongly performing board, according to McKinsey’s research, is having a robust long-term succession plan. As part of that, organisations must consider recruiting directors from a broad talent pool to ensure appointees offer diverse perspectives and experience. Boards that have more diverse composition perform more strongly than those that are homogeneous.

By using a digital intelligence solution such as Diligent’s succession planning tool, boards can access a global governance data set to help them identify opportunities, conduct board succession planning and reduce governance risks through being able to compare factors such as board composition and diversity against industry peers. When it comes to identifying potential appointees, boards can benefit from Diligent’s Director Network containing a global database of diverse candidates with skills and experience to contribute.

Digitising board governance delivers positive impact

Digitising board governance processes has multiple benefits that impact organisational and board performance. It saves time, freeing up corporate secretariat teams for higher value governance activities, and allowing directors to work efficiently and securely. Digitally enabled processes collect better quality data that can be analysed more effectively, delivering insights that drive continuous improvement.

Digital modern governance is about developing processes and a supporting technology infrastructure that is fit not just for the needs of today’s boards, but flexible to adapt to the changes ahead. Getting board governance right now is an investment that will pay dividends in future.

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