Tools such as board portals and teleprescence help mitigate the demands of board meetings, but they must be deployed correctly
This article originally appeared in the Corporate Secretary 'Governance and the Boardroom' special edition. Click here for the full publication.
When boards meet these days, they are tackling a growing list of complex issues while being presented with an array of technologies that can both help them and, at times, pose new questions. To start with, the board – through the corporate secretary – has to figure out when and how it is going to meet. With members increasingly busy with fulfilling the expanded demands of often multiple directorships and frequent traveling, this can be tricky.
Directors have traditionally solved this by telephoning into meetings when they can’t join in person, but newer tools such as videoconferencing and teleprescence technologies have helped make remote meetings easier to arrange and have improved the quality of participation, increasing its appeal. Industry professionals take a nuanced view on this, however, and say having the full board in the same room – particularly as members interact over the course of a day of meetings and meals – can be a real asset.
‘There is a certain amount of benefit boards get from in-person interactions,’ says Gibson Dunn & Crutcher partner Lori Zyskowski. ‘That said, it can be hard to get all the directors in the same room for all meetings. It may be difficult for boards to have teleprescence facilities, but it’s worth thinking about using secure video conferencing in some situations.’
‘The evolving technology is providing boards with some much-needed and desired flexibility,’ notes Weil Gotshal & Manges partner Lyuba Goltser. ‘[Technology offering remote access] is a great tool but it also presents pitfalls and needs to be used appropriately. Public company boards still have in-person meetings and it continues to be best practice. Personal connections made from sitting around a table help build a more cohesive board.’
Among the potential downsides of having directors elsewhere is that they might print out sensitive documents or notes, which can be discoverable in the event of litigation, so they often need to be destroyed or sent to the corporate secretary for safekeeping or destruction. Corporate secretaries handle this in different ways. One way to discourage directors from printing out materials is the use of board portals (see below), some of which have the facility to take notes and may be set to automatically delete these after a certain period of time, according to Sidley Austin partner Holly Gregory.
Corporate secretaries and general counsel should also make sure the jurisdiction where the company is incorporated permits virtual meetings, or allows them subject to conditions, and should check the company’s bylaws to make sure they also allow such meetings, Goltser says. On the plus side, she adds, having good technology allowing remote access to meetings can help companies recruit directors globally.
Board portal technology has become near-ubiquitous in recent years, and many board directors are now supplied with a dedicated laptop or tablet device for accessing their company’s system. While the device can be used in meetings for directors to observe presentations and take notes, professionals say it is more commonly used beforehand as a means to collate, update and prepare board materials.
Kent Rose, senior vice president, general counsel, chief administrative officer and secretary at Beam Suntory, says his board uses portal tools both before and during meetings. US spirits company Beam was bought by Japan’s Suntory Holdings in 2014, and many of its directors do not speak English fluently, so documents need to be translated and presented in both languages. Despite the distances, all board meetings take place in person, either in Tokyo or Chicago, Rose says. Although as a private company Beam Suntory does not have the same reporting obligations as SEC-registered issuers, it seeks to emulate corporate governance best practices of public companies, such as having board committees, and board minutes are still a requirement, he adds.
Curt Kramer, senior vice president and general counsel with Navistar International, says one of the benefits of using a portal is that putting the board book together and reviewing it can be done remotely. It also makes it easier for his team to control and submit materials – for example, changing a single page – in ways that were not possible when a PDF or paper version of the book was created. From a security perspective, the portal reduces the problem of people leaving sensitive documents in hotel rooms or other non-secure places, Kramer adds – and it enables more materials to be shared with directors without them having to carry heavy paper folders.
Although portals in general are welcomed by both boards and those helping them prepare for meetings, they require corporate secretaries to add another string to their bow: being the technology point person. ‘Corporate secretaries and general counsel are often very on top of the technology and can answer questions from directors,’ says Brian Breheny, partner with Skadden Arps Slate Meagher & Flom. ‘They tend to work closely with the vendor company so that they can be the relationship person with the directors.’
‘Corporate secretaries need to become experts on the basics of cyber-security as that’s what boards are most worried about,’ Zyskowski says, noting that part of such expertise is the ability to translate technology issues for the board and to explain board members’ liabilities and responsibilities. She says some boards use portals because they have better cyber-security protections for in-portal communications. She adds that, to help with communication security issues, the corporate secretary can also introduce an email policy that gives board members do’s and don’ts on issues such as ccing and bccing emails and forwarding them outside the group, and reminds directors of their confidentiality obligations.
Gregory is concerned by boards’ messaging behavior. ‘One practice that has become more common that is disturbing and should be approached with caution is using email for discussions on substantive issues facing the board rather than limiting email to the mechanics such as organizing meetings,’ she says. ‘In addition to the problem of the record that email creates, valid board decisions generally must be reached through scheduled meetings at which all participants can speak and be heard or by unanimous written consent.’
On the agenda
Boards are having to tackle an increasingly lengthy list of demands from shareholders and regulators in addition to negotiating risk management issues such as cyber-security. Certain major institutional investors, for example, are urging many companies to address topics such as sustainability (see Helping boards face climate change) and board diversity (see US boards lack progress on boosting diversity).
A PwC Governance Insights Center online survey in April finds that 39 percent of the directors and other governance-focused officials polled say executive compensation is the governance issue at the top of their minds. Nineteen percent and 17 percent cite political spending and board diversity, respectively, while climate change is the top concern for 15 percent of respondents and 9 percent point to proxy access (CorporateSecretary.com, April 13).
Regulation is another issue professionals say is on the agenda at board meetings, particularly in highly regulated industries such as financial services, given the Trump administration’s proclaimed anti-regulatory stance. This has led to general counsel and – in some cases – outside lawyers having to provide input at those meetings, and sometimes more frequently.
‘There is a great deal of uncertainty among directors given the current political environment,’ Goltser says.
Gregory agrees. ‘Boards are asking counsel for updates and people are gazing into their crystal balls,’ she observes. ‘Directors are watching the situation closely.’
Some boards are concerned their companies are wasting money by continuing to comply with rules that might go away, Zyskowski says. While this isn’t causing them to be fearful, they would like to know about changes sooner rather than later, she adds.