Has COVID-19 done something to Australian boards that years of legitimate criticism and the undeniable, overwhelming weight of evidence could not: forced them to take diversity seriously? And, just as importantly, to adjust to new digital ways of working — something many resist.
It turns out the turmoil of 2020 leaves little tolerance for old routines or old ways of thinking.
- Read more: Cover Story: From A Boardroom To A Zoom Room, How COVID-19 Has Impacted Directors’ Oversight
The COVID-19 disruption and the impact of the bushfires earlier this year had led many of Australia’s boards to consider whether they are sufficiently stocked with risk, technology, and ESG capabilities, according to Ann Bowering, CEO Issuer Services, AU & NZ at Computershare.
“It has caused directors to challenge the diversity on the board. So for example, do they have a technologist or technology person on their board, do they have representation around business needs and risks?”
Bowering says boards are now really changing the weight they put on risk and governance, beyond the mere box-ticking exercises of the past.
“You have really seen a shift to understand what the real underlying risk is to the business and how they are addressing and mitigating that risk. ‘How am I identifying that risk. How am I communicating that risk to my key stakeholders.’”
Even before COVID-19 emerged, she says, there was already a growing focus on ESG driven by the impact of the bushfires and the continuity risk that was created by that challenge.
All of this has led to a need for a better understanding of risks, which entails doing a deep dive into a business to identify the critical elements of that business. “And what happens if we take a critical element out of the equation? How do we solve for our business once we take out that critical element?”
She gives the example of a restaurant. “For a restaurant, you need your food supply, a chef, a menu, and then you have tables and chairs. But what does the business look like if you remove any one of those elements? How do you solve for that situation?”
Indeed, it’s a question Australia’s 22,000 restaurateurs have been asking themselves since the country locked down in March.
As it has in so many other aspects of society, the pandemic is challenging the way business is governed at the highest level.
The Commonwealth Government earlier this year implemented a short term, six-month rule change that allows businesses to run digital-only annual general meetings. It is now reviewing the experience.
Bowering is part of that review, having presented to a parliamentary committee on the topic recently.
“We spoke to the committee about the need for a permanent change in the legislation. The temporary change in the legislation expires in November. The question is not just can I conduct a meeting, but how can I also get effective engagement with shareholders during that meeting process.”
There are important considerations for shareholders as well, such as protecting their rights to interrogate the directors.
Bowering says there is a need to replicate the experience of a physical meeting in a digital form, as closely as possible. And that includes encouraging and facilitating questions. “When you [a shareholder] are typing questions, it takes a lot of time, you don’t get the preamble to contextualise your question. You don’t have transparency or visibility over that question being asked, and you have a gatekeeper and someone who’s looking at those questions.”
While there is a compelling need for change, the track record of Australia’s boards doesn’t necessarily suggest a heritage of agility.
The analogYe patriarchy
Echoing Bowering’s comment on diversity, UK based Ben Nowlan, founder & CEO of Shaparency, digital board and shareholder management platform told Which-50, “While the Coronavirus pandemic has drastically changed the way board management is conducted, the digital inertia in the time prior is linked back to board composition.”
He notes that the average board member in Australia is a 61-year-old white male with low technology proficiency and most likely, according to Deloitte, a lack of awareness as to how technology is disrupting their own industry.
“COVID-19 caught out a lot of companies and significantly disrupted governance processes because these board compositions were not driving technology adoption, moreover, not driving a digital agenda,” he says.
Nowlan says this highlighted the importance of digital collaboration tools across all levels of a business, including boards.
“Over the last four months, we’ve seen a large number of companies shift to virtual meetings and expect to see more boards go further, and transition entirely to digital platforms as they benefit from efficiencies in terms of cost, time and the environment.”
Irrespective of regulatory change, technology can drive productivity at board level, just as it does elsewhere in the business.
Nowlan describes the shift to digital-only board meetings as an enabler, without any downsides.
However, not everyone agrees. Because in the world of real things, technology, just like people, has its limitations.
Geoffroy Henry, the founder and CEO of Loadsmile — an Australian based road freight logistics platform — told Which-50, “When you start, you have every single person separated from each other. The communication channel and knowledge transfer becomes a lot harder. And the first reflex is to set up numerous meetings to make sure that we still communicate. But then we can’t execute.”
According to Henry, “You’re sitting in a lot of meetings every single day where no real output is generated and then no-one can execute that challenge. The second challenge is as soon as projects go beyond your own scope and you have to deal with different parties, different teams, and different people. You start to tend to delay votes because it becomes a lot harder to coordinate a routine to make sure that we can all take initiatives, but with a clear owner in every single scope.”
He says his own experience in the first few weeks of the lockdown and the switch to digital was that the decision process was impacted as the board adjusted to confinement.
“It took some time to implement the right processes, tools, and structure into the projects we wanted to put in place.”
Gerd Schenkel, the Chairman of Australian technology company CreditClear and director and Digital Practice Leader at Partners in Performance, cautioned that technology is not always seamless.
“Our company is based in Melbourne and we operate nationally. Our CEO is based in Adelaide. I live in Sydney so we always had facilities available. But it is easier if the majority of the board is in one room.
“And fidelity is still an issue. The audio is not quite good enough, you do lose the richness of a conversation. And for some of the conversations that really does matter. It’s not that they’re controversies, but you’re trying to find out the right answer for a company. Sometimes there’s bandwidth issues. You know, sometimes it’s the quality of cameras and quality of audio.”
CreditClear also recently held a virtual AGM. “In the first instance, there were some logistical things to consider. So starting with the ability to connect. Obviously, in terms of governance, you need to give people a reasonable chance to connect and participate.
“You can’t start on the dot and race through your agenda. [You need to] give a bit of time for people to get connected and make sure everybody’s getting good reception.”
And, he says, you need to have a fallback if that doesn’t happen.
There were other issues to consider as well.
“What do you do with votes that couldn’t be cast, for example? And then there are other logistical things around votes. How do you deal with proxies or how do you actually take a vote in a meeting? Physically, that’s quite easy. A lot of these AGM type questions are very uncontroversial and therefore they’re typically unanimous and in a room to raise up your hand or whatever, quite obvious. That’s not as easy to do [digitally].”
Schenkel says he expects the experience over time will get better, and he draws a distinction between board meetings and virtual AGMs.
“For an AGM, it’s not an executive group where people know each other on the board. These are people who don’t know each other. And we had 100 shareholders. So there’s a broad range of people used to technology — some people are good at Zooms, some people don’t know Google Hangouts, whatever. So you need to slow down, I think, in general, and not be afraid of the silences.”
Brett Herkt, the CEO of New Zealand-based BoardPro, which also provides tools for directors, but which is typically focused more on the mid-tier, says that digital platforms can address some of the problems identified by leaders like Henry and Schenkel.
“When you think of a board meeting there’s a process or workflow that goes to six or seven or ten people arriving in a board meeting and holding management to account to guide the governing organisation,” Herkt said.
“And that includes really simple things from scheduling meetings, setting in a work plan for the year, saving an agenda for an individual meeting. There’s consultation around agendas, there may be a legislative requirement that board members need to be able to see their agenda. Then you‘be got to run the meeting and you‘be got to take minutes.”
Trying to manage all those discrete physical tasks within a workflow using disparate desktop software is just silly, he says.
“You can do it ten times more efficiently, where you’ve got a built piece of software that steps you through that and does the heavy lifting for you.”
There was a consensus when we asked about the emergence of digital fatigue for directors. Nicola Acutt, VP Sustainability Strategy at US tech giant VMware in San Francisco, told Which-50 “It’s a real thing that’s been experienced on multiple levels and its certainly a challenge.”
Acutt says it is important to consider the mental health toll that it can take on the workforce.
“I think people are only just starting to get their heads around it. There’s been so many fascinating challenges to have to work through starting with mundane issues such as how do you get someone set up with the right equipment. You can’t go to the IT team in the building. There are many things that we’re learning through this process. And some of them are more stressful than others. But I would say if I were to put money on it, that the biggest one is people adjusting culturally to digital life.”
For his part, Loadmile’s Henry says, “It’s a different type of fatigue.
“Things are more formal. It’s finishing a meeting, clicking on the next link, enjoying the next meeting, and then it happens you have eight meetings in a row for a full four hours. It’s hard to breathe.”
It is even harder for executives than board members, who likely do not face the same volume of meetings each day, according to those with whom we spoke.
According to Henry, “It’s hard to take perspective when you’re sitting in a position as a CEO, or as a top executive, and your output is really to provide responses to the questions that the team has. It’s hard to make sure that you think through the questions and that you really take the time to think of the appropriate strategy and a process to put in place.”
Schenkel acknowledges that it is starting to happen. “I’m experiencing it for friends and colleagues. We talk about it and I’ve actually read some articles about it too. It seems that video conferencing does consume more of our energy and therefore tires you more quickly.
“If your entire day is half an hour Zoom conferences, that would be extremely tiring,” he says.