Francis Bacon once famously said that knowledge is power. Today that adage could not ring truer for board members. In 2017 the Economist argued that ‘the world’s most valuable resource is no longer oil, but data’. For board members, obtaining key information, securely, is imperative to greater performance. With greater responsibilities come greater risks for directors today. So, how can boards today bridge this gap to glean sharper insights and what are the dangers of not doing so?
INFORMATION IS POWER
The hallmarks of an excellent board brings many things to mind; Independently minded, strategic thinking, representative of the interests of shareholders. The bread and butter tasks of modern boards are to monitor the CEO and choose his successor, overview company performance in all weathers, stay aligned with all strategic operations and asses financial reporting along with risk management.
However, what is clear amid this deluge of tasks is that the information needed to carry out these tasks can be blighted by the information gap that exists between board of directors and management. The pressure and bandwidth of board member tasks is increasining.
In April this year, the Wall Street Journal reported that Google had ‘quietly disbanded another AI review board following disagreements’. This move according to key sources, boiled down to a critical lack of information access, for board members. This example highlights how even Silicon Valley giants are struggling to bridge a serious information gap.
HOW NETFLIX’S BOARD OF DIRECTORS IS INSPIRING GREATER COMMUNICATION
Netflix, who have disrupted the entertainment industry, were recently the subject of a Harvard Business Review article, where corporate governance experts David Larcker and Brian Tayan discussed what they were doing, with exceptional results.
It seems that at its core, Netflix are disrupting how information at board level is gathered. Board members, “periodically attend (in an observing capacity only) monthly and quarterly senior management meetings”. The board also communicate “in the form of a short, online memo that allows directors to ask questions and to comment within the document” in real time, so that text and questions can be amended in a “living document”. This according to Larcker and Tayan is what has made Netflix a stellar example of an extraordinary company in the past few years.
While the first strategy discussed may prove more challenging to mimic, particularly for smaller and medium sized enterprises, the second one is critical to improving the accuracy of information board members receive while also increasing efficiency. For independent directors, this is even more imperative. According to Wayne Guay, a corporate governance expert and professor at the University of Pennsylvania, “More and more of the decision-making in public corporations is in the hands of independent directors. And that’s only going to work if those independent directors have the information that they need.” Board portals, like DiliTrust Exec, securely allow information to be disseminated, accessed and shared between board members.
PREPARATION ENABLES STRATEGY
Culling the information gap on your board of directors, by enabling greater communication via board portal tools can lead to excellent results. The question of what else can inform greater preparation is another key element to improving board communication.
Research that McKinsey & Company complied found the following elements accelerated communication and in turn board performance:
- Greater time commitment: well performing boards surveyed considered a board member commitment of up to 25 days for non-executive board members which is double the average commitment of 12 days per year.
- Field work: Informed boards who have in-depth knowledge of their companies’ operations are spending a significant quantity of this extra time, gathering on the ground knowledge of their companies’ operations, markets and operations.
- Board environment: McKinsey found through their contact with high performing boards, that achieving the right degree of board insights what is critical. They noted that ‘a board environment that encourages participation and allows board members to derive meaning, inspiration and satisfaction from their work’ is crucial. An open and transparent board environment is facilitated by the use of board portals, like DiliTrust Exec, which allow for greater communication thanks to its intuitive features like voice notes, polls and surveys.
SECURITY, NOT COMPROMISES
Why is security fundamental for bridging the information gap on boards? Security continues to be a huge grey area for many boards of directors as IT skills are lacking. According to experts, ‘most companies face a big talent gap when it comes to data management’. For boards, the issue of cybersecurity as a whole, seamlessly bleeds into their own roles and duties. The Harvard Business Review counsel that for optimal security businesses in ‘strategic mode should have an IT oversight committee chaired by an IT expert’.
One critical step for boards to take to ensure higher security protection involves securing the highly confidential information they have at their fingertips. By adopting a board portal, like DiliTrust Exec, board members can trust that their data (stored locally on servers in Europe, the Middle East and Canada), is GDRP compliant and ISO 27001 certified. To find out more information about how secure the DiliTrust Exec board portal is, please contact a member of our team today.