Governance isn’t a palpable thing, which makes it somewhat hard to define. Not being able to define it, touch it, see it or hear it also makes it difficult to know whether governance is good, bad or mediocre. While all that may be true, board directors will easily be able to recognize the effects of good governance when they happen.
While defining governance as a concrete thing isn’t really possible, we can put together a list of characteristics that, when viewed collectively, form the basis for good governance. Good governance doesn’t require board directors to make good decisions every single time. However, it does require boards to make the best decisions they possibly can. The best possible decisions require using the best risk management processes, which includes gathering information, evaluating that information and using it to guide the direction of the company. Once strategic plans are moving along nicely, boards need to practice oversight to make sure that their plans are being implemented.
Essentially, there are eight main tenets of good governance. The question is, “Does your board portal provider support these eight components? If so, how? And is your board technology working well enough for you to fulfill your board duties so that you can make the best decisions that you possibly can?
The Rule of Law
The rule of law means that rules and laws should be obeyed by everyone. There should be some authority that enforces fairness. In the marketplace, the rule of law refers to the laws and regulations that protect the shareholders and stakeholders. A board portal that helps board directors comply with the rule of law will have features that automatically signal when D&O questionnaires are due, when an audit needs to be done, and when quarterly or other reports need to be released. The portal will have a program for completing and submitting D&O questionnaires. An electronic system for entity management will help with internal controls, financial reports and other planning tools.
Boards are accountable for all actions and decisions of the board. They must be accountable to the shareholders, customers, employees, the rule of law and to each other. The board portal should store a record of risk reports that demonstrate how the board arrived at their decisions. A board portal that supports good governance will have sections for the bylaws, policies and protocols. There should be an electronic folder for each board member that includes a short biography, job description, term of service, and other information about board duties and responsibilities.
Board directors should insist on receiving reports that are transparent and easily understandable. They may also want to initiate training for board directors in analyzing reports. Reports should be openly available to those who are affected by policies and practices. A board portal should have the capability for administrators to limit permissions only to areas of the portal that board members need. Board directors should be able to retrieve documents quickly and easily when needed to demonstrate how they made their decisions if they are ever called into question.
Good governance protects the corporation’s assets, including from lost revenue, control of operating costs, preventing undue legal matters and loss of reputation. Cost-effectiveness also includes making the best use of resources. A board portal that has the latest in security in the portal and in its components, will save the company massive amounts of money by preventing a data breach.
Board directors must be responsive to shareholder requests and concerns in a timely and appropriate manner to avoid proxy fights, dissent over director appointments and other issues. An enterprise management system built into the portal will aid in achieving goals and preventing scandals. A board portal should support automatic voting and resolutions in real time.
Equitable and Inclusive
Part of good governance is providing an opportunity for all stakeholders to place their interests and concerns before the board. Customers, employees and investors should know that there’s a process for the board to hear them. The board must be equitable and inclusive, considering everyone’s interests before they can provide for the good of all. Board directors should be able to access documents and reports that prove that they’re listening to their constituents.
Effective and Efficient
Board members should make it a practice to make the best use of their resources, including people, technology, finance and natural resources. A board portal will save much on the cost of time and labor in producing board books, making it an effective and efficient tool. A full-featured board portal will have electronic processes for producing D&O questionnaires, director evaluations, meeting minutes and more to support cost-effectiveness.
Good governance is participatory at all levels of the corporation. Board directors should invite employees, managers, lawyers and third-party vendors to provide advice, information and expertise in their area of industry. This is important to internal controls and monitoring to prevent risks from occurring. Their reports should be documented and stored inside the board portal, so the board may refer to them as needed.
One of the major recent topics surrounding board director appointments is diversity. Board directors need to consider including participation from men, women and members of different ethnicities on their boards. Boards also need to consider the board composition in terms of skills, abilities and talents. Boards need to be able to build trust so that all board members can offer their ideas and strengths to the boardroom.
Boards gain much from electronic director evaluations. First, they learn how in sync they are with the organization. Second, they learn more about the weaknesses and deficits of current board members and the whole board, which should lead to a more refined approach to director recruitment. Director evaluations are a valuable portal tool, as they point to areas where directors need more training, education and skill enhancement.
Above all, good governance must include a robust security system that covers all electronic applications for preventing against cyberattacks.
Just as governance has many components that work together to bring forth the best sets of ideas, experiences and talents to achieve the best outcome for the success of the organization, a board portal provider that supports good governance also has many components. A board portal, in and of itself, really isn’t enough. Board portals that support good governance also electronically support every process that board directors use, including D&O questionnaires, director evaluations, communications, minute-taking, resolutions and voting, and entity management.
What is the Governance Cloud?
Board directors are obligated to perform a host of varied duties and responsibilities. Diligent developed a suite of governance tools to help them fulfill their responsibilities accurately and efficiently. The Governance Cloud ecosystem of products includes:
- Diligent Boards
- Director and officer questionnaires (pre-filled forms)
- Board evaluations
- Resolutions and voting
- Diligent Messenger
- Diligent Minutes (beta)
- Insights (curated content and videos) (beta)
- Entity Management
As board directors, leadership teams and general counsels continue to express their needs to digitize governance processes, Diligent will be the partner to grow with them. Collectively, these tools enable corporations to achieve a fully digitized and integrated governance ecosystem to mitigate risk, plan for strategic growth and ultimately, govern at the highest level.