iPads in the Boardroom (2)

Delivering board papers via an iPad or other tablet device is a growing trend among companies seeking cost-effectiveness and convenience. But electronic delivery of board packs is fraught with legal, risk and security challenges.

Until recently, most companies printed and bound board papers and couriered the pack to the directors prior to the next board meeting. The board packs were cumbersome, heavy and there was always the risk of the papers being lost in transit or unable to be delivered because no-one was home to receive them. There were also security issues if the packs were left the front door unattended.

Over the past 12 months, a number of companies have launched products which deliver board papers securely via an app, and company secretaries are presenting shiny new iPads to their directors. Other directors who are already veterans of using tablets to read and annotate their board papers choose to use their private iPads for all the boards on which they serve.

Where once the board table was strewn with folders, papers, stick-it notes and pens, now the mantra is BYOD:  Bring Your Own Device.

Board members believe that receiving their board papers via a tablet device is inevitable. But in the rush to embrace new technologies in the boardroom, directors must be cognisant of the potential legal ramifications of digital delivery.

In this article I illustrate this by discussing hyperlinks, annotations and passwords.

Hyperlinks

Ironically, one of the common complaints directors make about reading board papers on their tablet device is the size of the board pack. When the board pack was prepared in hard copy its thickness was obvious. The size of digitally-delivered board pack is much harder to determine and directors only learn what’s ahead for their weekend reading by the length of time it takes for the pack to download.

The download time can be related to the speed of the internet connection.  But the more common reason is the size of the pack and whether the papers feature complicated graphics. One way to overcome the download time is to use hyperlinks.

For an IT expert, a hyperlink the obvious solution to complaints about the size of the board pack and the length of time it takes to download.  The problem with hyperlinks from a legal perspective is that a hyperlink is easy to miss when a director is reading and annotating the papers.

Legally, if a hyperlink is part of the board pack the directors have an obligation to read its contents just as if it were a board paper. It’s a flimsy strategy in the event of a court case that a director will use the defence: "but it was in a hyperlink and I didn’t click on it".

Annotations

Another tricky legal area for director is annotations. There are a number of apps which allow directors to annotate their board papers easily and conveniently. The issue is less about how to make annotations than it is what to do with the mark-ups after the board meeting.

If the papers were to become material to a court case in years to come, would a director remember why he circled a word on page 43, wrote an exclamation mark on page 126 or doodled a smiley face at the bottom left-hard corner of page 152?

The ANZ Bank last year announced that under legal advice it had deferred introducing iPads to the boardroom, citing concerns about data security. “Under Australian law the annotation is a problem,” ANZ Bank’s chief information officer Anne Weatherston told The Australian Financial Review at the time. “While we can secure the board paper, any annotations you make sit outside of the network and we cannot capture them or store them as a corporate-owned document.”

The Board of the ANZ Bank now uses iPads with the papers contained in a secure app. “However there are legal risks regarding annotations,” Ms Weatherston told Boards and Governance. “As such we do not allow board paper annotations on the iPad.” 

Boards are addressing the issue in different ways. In some cases, the board papers and the annotations are deleted manually from the iPads either by the directors or the company secretary at the end of each board meeting. In other companies, this is done remotely.

Some directors who are especially concerned about electronic annotations use a small notebook in which to write their annotations the old-fashioned way, and shred the notebook after the board meeting.

Passwords

Remembering passwords is the bane of life in the digital age. From internet banking and bill paying to the websites of professional  associations, regular online shopping websites and social networking sites, remembering each and every password is very difficult and tiresome.

Board papers delivered on iPads or other tablet devices are protected to a larger or lesser degree by the level of security provided by the company and/or the app the company secretary uses. However, if the director allows the four-digit password on the iPad to be easily visible when it’s entered, the device can be easily stolen and the information extracted. Public places including airport lounges and the business class cabin of an aircraft where directors often fly are common areas of potential risk.

Two factor passwords are one way to address easily deciphered security codes. One factor is something known to the user and is a password. The other factor could be a token, a fingerprint or facial recognition.

Complicated passwords that contain a mix of numerals and letters in upper and lower case are another option to increase security - but they are much more difficult to remember.

Conclusion

When board papers were delivered in hard copy there were just as many legal, risk and security issues facing the company and its board.

The packs could be stolen, photocopied, emailed to competitors, left behind in airport lounges and taxis. The digital age has not eliminated these risks but in some ways it has made security more difficult to ensure.

As directors become more familiar with using iPads or tablets as just another business tool, downloading board papers, reading and annotating them and keeping them secure will become a matter of course.

In the meantime, creating a board protocol or policy on how papers can be kept secure is a worthwhile board agenda item for discussion.

Are your Board papers representing your leadership capabilities?

When I teach executives how to write board papers I often start the workshop with the clichéd image of a student cramming for exams. Books and folders piled high on either side of the desk, the message is clear - this person is overwhelmed and unsure of where to start.

This is the image I want workshop participants to remember when they’re writing board papers. I want them to think about their audience which is probably the most difficult group in the organisational structure to write for, and to present to.

Many company directors serve on multiple boards. This means that every month or so they are required to prepare for the next board meeting by reading, absorbing and annotating their board papers. Whether their companies are providing board papers in hard copy or electronically, the impact of volume – and especially unnecessary information – is the equivalent of the student buried under a pile of books.

If it’s unclear why they’re reading the paper – is it for noting, for decision, for information? – the director will become frustrated or worse. One public company engaged me to run a workshop over four days with 30 executives after a director expressed his feelings about the quality and standard of management’s abilities in one very rude word written across the cover page of a returned board paper.

Writing a board paper is the ultimate test of being able to argue well, present facts accurately and logically, and to persuade an audience of seasoned and experienced business people to support a proposal.

Delivering a board paper that is poorly composed, dotted with typos, grammatical errors and spelling mistakes, over-written and lacking logic and supporting evidence is not the way for management to gain the approval and support they’re after.

Should company directors be on Facebook?

Before social media was part of daily life for many people, I was engaged by KPMG to research and write a report on the training and education of Australian board members.

After conducting a series of interviews, I concluded that board members believed they only needed to attend courses on corporate governance and related topics if they weren’t “experienced” in the boardroom.

The interviewees – all prominent company directors serving on boards of listed companies as well as significant non-profits - considered the content of most courses to be too “low level” to be of any assistance to experienced board members. Consequently, they were more likely to be guest speakers at such courses, rather than participants, they said.

Their time would be better spent reading and talking to peers and management rather than attending formal courses. Of the sources of information on which they most relied was the Australian business bible, The Australian Financial Review (AFR).

Fast forward a decade and I wonder how many directors today think the same way? Is the AFR – or its equivalent in other countries - still regarded as the best source of business information for the company director?

There is a plethora of information available online but how many company directors are comfortable sourcing it? Many tell me: “I’m on Linked In but I hardly ever check it because I don’t have the time.” One director said that in order to maximise the time she spends with her children, she severely restricts her usage of her computer. She relies on the weekly media updates she’s sent by her companies; she also reads the AFR.

Yet social media forums such as specialist discussion groups on Linked In provide directors with a network of peers and specialist advisors with whom they might not otherwise engage, let alone meet.  Some of the world’s biggest brands have a Facebook page. The chairman of an ASX20 company may not feel the need to tweet but all directors should understand the power of Twitter.

Social media is the way many people choose to engage with the world – people who are a company’s shareholders, stakeholders, employees and customers. These new ways of receiving and disseminating material shouldn't be ignored.

A quick peruse of a selection of "favorite" websites - including overseas business newspapers - as well as logging in to Facebook and Linked In is exactly the same as opening the AFR over breakfast, turning on the radio to listen the the ABC, or watching the late SBS news of an evening. It's a habit and it's part of staying in touch with how the world is thinking.

iPADS IN THE BOARDROOM

The information that comes to the board, and the manner in which it is presented, is critical for board decision-making.

Traditionally the board receives a "board pack" - a thick pile of papers written by management which is packaged by the company secretary and sent via courier to the director's office or home.

This information is supplement by presentations to the board by the CEO and the management team.

Over the past year, the possibilities of the iPad are changing the way directors consume their board papers.

Chartered Secretaries Australia says the advantages of iPads include:
1. portability and ease of access to current board papers and an archive of past papers;
2. security - password protection may mean board papers are more secure on an iPad or tablet than in hard copy;
3. printing and delivery cost savings (after initial outlay for the technology);
4. improved record keeping.

Introducing iPads to directors isn't always a straight-forward exercise. Company secretaries I speak with talk about intensive training being required for some directors who are unused to the technology. Ensuring security of sensitive information is an imperative.

In subsequent posts on boardroom technology I'll convey the experiences and advice of company secretaries and chairmen who have accepted the challenge of using iPads in the boardroom. It's not simply a case of buying a set of eight or 10 iPads and letting directors start annotating their papers. Much more preparation is required. The good news is that the effort seems to be worth it.