Episode 9 - The boardroom of the future

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JB: Thanks Rachael and hi everyone. My role at Nasdaq is to lead our board advisory work, as well as our Center for Board Excellence in Europe, Middle East and Africa. My background is governance advisory through and through. I joined Nasdaq a short while ago, just over a year ago, from Deloitte, where I've been for the best part of a decade, leading on board effectiveness and also broader governance transformation as well – helping organisations go through governance change.

When I reflect on the boardroom of the present, it owes a lot to three things in my view. Firstly, technological developments, starting with the iPad and the first board portals. Secondly, considerable work from company secretaries and other parties, including shareholders, proxies, directors, and regulators to deliver continuous improvement and implement good practices. And thirdly, probably unsurprisingly, the Covid-19 pandemic, where I think we will all recognise that we've seen changes in practices necessitated by not being able to come together.

So, the boardroom of the present is a boardroom that for a few years has been successfully using technology and doing so quite effectively. Information is able to be delivered quickly and securely on the go and at the desk. Discussions and decisions are able to be tracked very clearly. Strong boards are well supported. Processes are sophisticated, interdependencies with other processes, with different functions, are clearly understood. Particularly when I have my board evaluator hat on, they [strong boards] are self-critical and committed to improvements. We have embedded the concept of a board evaluation, a board performance review, as a good practice. Rarely do we ever have a conversation with a board where they don't really take some value from that process.

[In the boardroom of the present,] meetings do not require directors and attendees to gather in one place. Particularly for instance, [during] the Covid-19 pandemic, as lockdowns and evolving rules prevented people from travelling and gathering, boards pushed more consistently into the virtual environment. Some were already practising virtual meetings, we need to say, particularly those with international membership and those conscious of their environmental impact or even just for convenience, but quickly it became the standard because it had to be. Boards have quickly become accustomed to meeting via [Microsoft] Teams, or Zoom, or Webex. As we've emerged from the pandemic and returned to normality – hopefully we can say that – most are maintaining at least a hybrid approach with certain meetings held virtually as required.

JB: I think in this context, we need to be thinking about that next stage of board evolution. The slightly less tangible things. We can all see where additional functionality to different tools could be added, the things that we have in our hands where we think, okay, what else could I do with this? But thinking five, ten, 15 years hence, we inevitably end up considering emerging technologies, and how they might enable boards to deliver on their responsibilities more effectively, more efficiently, and to add more value.

JB: It's a good question. If we reflect on the last few years, those things that I mentioned in terms of starting with iPads and the development of the first board portal software, we've seen tools develop rapidly. The first iPads were launched in 2010, but they didn't necessarily come into the boardroom, really, even though people saw the potential, till about 2015. That was when it [was] time to link up with other tools like portals, where people are saying, we would like to be able to see information on the go, we'd like to utilise that functionality of the iPad, how can you do that? These technologies started to then congregate and develop together to really add that value, and the functionality that was needed. Really, we're looking at the last four to six years where things have really developed quite rapidly.

When we ask the question, why should we be thinking about this today? Well, that picture can change very quickly in terms of the tools that are out there to facilitate an effective board. From my point of view, it's important to keep up a level of understanding to keep that finger on the pulse.

Alongside that, we have undeniably clearer expectations from stakeholders. Not only are those expectations clearer, and by stakeholders, I mean shareholders, I mean employees, I mean customers. Not only are those stakeholder [expectations] clearer, but they're also communicated more directly. We're seeing people vote with their feet as to whether they go with one organisation or another when they have a choice, maybe depending on things like a clear commitment to good governance of sustainability matters, for example. Put those two things together, there's some louder voices and clearer opinions in the room pushing in this direction for continuous improvement. We've already seen evidence that that has happened in recent years, and there's no reason to think it wouldn't continue.

Boards and organisations don't want to be left behind or caught by surprise on this. That doesn't mean that you want to be at the vanguard, necessarily, not every organisation does. But I think being diligent, keeping up with potential emerging practices and opportunities, looking at potential partners and saying, ‘okay, how could we explore something together?’ feels like a diligent and sensible thing to do.

I'd link that back to, from a board director’s point of view, directors’ duties and performing them diligently. There's almost an obligation to identify opportunity for improvement. When we think about how board effectiveness is now, thankfully, in the UK particularly, really embedded in the ways boards think about what they what they do, hopefully that obligation comes to the fore, and it's a natural thing to look around and say, ‘okay, what else can we be doing to really add some value here?’

JB: Particularly, I would say, in the boardroom. Because I think in this context, if we're saying, what does that boardroom of the future look like? Inevitably, we put that laser focus on what's going on in the boardroom. But, what gets to the board is coming from elsewhere in the organisation, and the board has that responsibility to be looking at the information it receives, when it receives it, how it looks etc. It has an obligation to be considering that and then advising and directing what its expectations might be. I think probably [there’s] a knock-on impact beyond the boardroom in terms of ways of working.

JB: I've been brainstorming this a little bit recently and there are some interesting things to pick up. Inevitably, there's a strong technology link in my answer here, doesn't mean that the boardroom of the future is linked purely to technological developments, but inevitably, that is the theme that runs through.

The first thing I get quite interested in as a concept is ‘Alexa in the boardroom’, as you might call it. We have Alexa in the bedroom, in the living room, etc, where we can ask Alexa a question, and Alexa will tell us the answer. I think it's very interesting to think about the applications for that kind of technology in the boardroom as a way to inform decision-making and discussion. Being able to ask effectively a robotic corporate memory, in real time. Reflecting on, ‘when was this thing last discussed?’ Or, ‘can you play back the minutes of that agenda item at that meeting?’ That can be quite interesting. At the same time, you could ask [it], as it develops, to perform real-time analysis of documentation in order to really build out a picture on that and play that back.

I think linked to that, maybe a slightly less sophisticated but potentially just as powerful and even less risky – we'll come on to that inevitably, I think – [a] linked concept is chatbots in the boardroom. Like Alexa, but simpler. An ability to ask questions, but this thing isn't necessarily actively listening to discussions. It might be text rather than voice, that's quite interesting.

On the subject of bots, I think about what we might call ‘chaos bots’. Something that can be used to, think of it as throwing a grenade into a situation, but in a safe environment. Where you might have a bot to create a scenario, create a situation, that can be really powerful for the board for their scenario testing. What would happen if x happened? And go through that real time to generate incidents, situations for wargaming. You could see that being brought into board meetings, whether [on an] ad hoc or regular [basis], in order to see what reactions would be and to challenge back on some assumptions.

JB: I think inevitably, when we talk about Alexa in the boardroom, there's going to be the question of, okay, this is a listening device. Where and how data is stored in that kind of scenario will be incredibly important. If Alexa is listening to boardroom meetings, a board meeting [discusses] highly sensitive information, and [it’s] incredibly risky where that might end up and how it's encrypted, etc. I think [the board would] probably go towards on-site data storage for anything like that.

We first think to the challenges of where information might be stored, and by whom. Use of the cloud could pose real issues from the data security and a wider risk management perspective. If and how anything is recorded for the purposes of providing those services that's likely to cause concern: could that information be discoverable to regulators, for example? Or opposing legal advisers? Could it, by [virtue of] its existence, supplant minutes as an official board record on a de facto basis? Of course not, you wouldn't want it to, but could it almost become de facto something which supports minutes? Which wouldn't be in accordance with what we see as good governance practices.

I think there is potential for over reliance on technology in decision-making as well in these kinds of scenarios. If we think of other potential technologies in the future, you could have crowdsourcing or real-time analytics and feedback, maybe standing panels representing stakeholders whose feedback can be sought and played back through data analytics real time in the boardroom. You could use artificial intelligence (AI) for management information analysis, minutes analysis, i.e., looking for tone or the number of times a stakeholder is referenced for example, or diving deeper into information etc. In those kinds of scenarios, if you have those other potential future developments, then you could have an over reliance on technology in decision-making. We can imagine board meetings becoming quite clunky at the very least: asking Alexa, speaking to a chatbot, asking a panel for feedback, stopping to understand some data analytics that have just come through. Discussion could become limited by deferring to technological solutions that are supposed to enhance debate, but instead end up taking up time being taken at face value.

You could have a risk around shadow directors and outsourcing decisions. These kinds of technologies can also dilute accountability in theory. The scenario of, ‘we thought this as a board, or I thought this is a director, but then the technology said that, and so we felt compelled to go with that.’ The more tools and information a board has at its disposal, the less agency some directors may feel they have and in poor-performing boards, you can see these kinds of things being used as an excuse.

The last thing I'd probably say as a risk there is, is pressure on time and agendas, boards are under enough time pressure. Going back to the clunkiness point, bringing in technological solutions may take up valuable time in the boardroom, or for directors overall outside of the boardroom. I would just say in thinking about all of these things, what we shouldn't be doing in my opinion, is looking for solutions for solutions’ sake. We don't want bandwagons that end up [with] the implications not being understood. Instead, we need to be careful to identify opportunities for real value-add and think carefully about how and when those tools are used. And that's a subjective thing for each organisation. Just because the guys over there are doing something, doesn't mean that necessarily works for you, given where you are, the risk you're facing, everything that's on your agenda. It might just be that you prioritise in a different way.

JB: Yeah. We've seen that to be fair over the last few years, when it comes to board portal software, close to our heart at Nasdaq, it’s something that we provide and something we see as incredibly important. For many organisations, they need that [opportunity to say], let's just have a trial, let's kick the tyres on this a little bit. Maybe it's the same with new functionality that's being added. You don't necessarily want to just say, yes, we'll go with that. Because it could end up being a distraction. So yeah, it is definitely something organisations should think very carefully about and think about the timing that’s right for them.

JB: It depends on boards, depends on the director. I think some organisations, some boards are slightly more tech-savvy, or future-tech-aware, or governance developments-aware if we want to bring it up to a whole other level, than others. What becomes really important is, almost going back to that original point I made in terms of being connected, taking the ownership of being aware of trends as they emerge and opportunities as they might arise. Be connected to the right advisers, get them in front of your board, because they will always get in front of people, there'll be very happy to talk through what the benefits might be or not. Think about those partners, where you really have that trusted adviser relationship, and you can explore these things together, hypothetically or literally, in order to make informed decisions in as efficient a way as possible.

JB: Absolutely. I think that the board of the present is tech-enabled and tech-savvy. Of course, not every board is the same, but that's where we are now. I think we know that technological developments can really support effectiveness, support decision-making, and free up time and all sorts of other wonderful things and mitigate risk when we think of things like data security, etc.

Boards are looking for more convenience, i.e., looking for tech across different devices, how we bring things together, integration with other platforms, like integration with [Microsoft] Outlook in a full and true sense. Processes like board evaluations and management of conflicts are increasingly digitised; that's due to client demand. All of these things, we can't ignore, [in terms of] data security, digital portals and processes are far more secure than paper and email. Portals allow tracking of when things are forwarded, when things are printed, when items are opened. And there's a huge amount of data encryption which goes around it. There's a constant drive for greater security in a rapidly changing world and we spend significant time and resource on continual improvement in that regard.

JB: Yeah, it's [about] teamwork. It's clients asking the questions and saying, ‘look, these are our concerns, these are our expectations, the standards we expect you to uphold.’ And its providers of these kinds of platforms investing that time and resource to make sure that they are going to be meeting those expectations and trying to get ahead of those questions even, pushing that envelope further and further. I think you can't separate out the security aspect going forwards. That's why I think when you asked earlier on about what are some of the risks, the first filter I was putting on that was, where is this data going to be stored? And how's it going to be stored? That’s going to be a question that will be the first on the lips of the board members, and the company secretaries, and the general counsels. To be any form of viable solution the developers of that solution will need to be able to do to answer that question.

JB: I think partnering up, working with partners, the trusted suppliers at the moment, or potential suppliers, the big services firms with their different specialities. Developing and testing functionality together, that could put boards on the front foot. I don't think that company secretaries should be afraid to offer views, to make requests, or ultimately to offer to be a testbed, it can really have value in itself. It's risk and it involves time and other investment. But the benefits in the broader landscape of good corporate governance, but also to the board and to the organisation itself [are] potentially great.

No matter the challenges boards face in the coming year, that duty of curiosity that I alluded to earlier on is key, both to meet the constantly evolving landscape of threats that we're seeing now and to seize those new opportunities. I think we'll see the boardroom of the future will be populated with directors from a variety of disciplines who have an insatiable appetite for learning, because we're seeing those kinds of things already really ramp up. And hopefully [they have] the stamina to remain relevant as well.

JB: Thanks, Rachael, pleasure.