Posted by: CS Shilpi Thapar
Digital India is one of the key initiative of the Government of India which has three main mechanisms i.e creating effective digital infrastructure, delivering services digitally and ensuring digital literacy among citizens of India. The call for ‘Minimum government, maximum governance’ has grown louder these days. There is maximum use of technology for implementing better governance practices in the Nation i.e. Computerization of government departments, tremendous use of web-based system for government services, implementation of e-governance in corporate world by launching of MCA 21 (electronic filing system) by the Ministry of Corporate Affairs in 2006 and other online website of various regulatory authorities which facilitates efficient functioning, transparency, accountability, reduction in corruption and limiting the usage of paper.
The Companies Act, 2013 has highlighted the significance of e-governance for Corporates in India as:
- All compliance filings will be done electronically with Registrar of Companies (ROC),
- The companies can maintain their records, registers, books of accounts, notices, forms, declarations, and minutes in electronic form which is termed as “E-Records.”
- Service of Documents such as Notices, Agendas, Minutes, other relevant documents can be done electronically by email to Directors and Stakeholders by companies saving a lot of time and cost.
- E-voting can be done by shareholders in General Meetings of the Companies.
- Directors can attend board and committee meetings via Video Conferencing.
- Dividends can be paid to shareholders in electronic mode instead of issuing cheques.
The e-Governance in India has steadily evolved to be more citizen-centric, service-oriented and transparent. Even medical practitioners rely on electronic medical records today. So now, it is the time to use technology in the Indian Boardrooms and design them as E-Boardrooms to ensure more transparency and accountability.
Companies today operate in a very complex business environment with increasing regulatory scrutiny which has eventually increased the amount of board work and the number of board and committee meetings that is required to be conducted. To conduct the effective board meeting is the main component of Corporate Governance. It is often seen that for conducting a single meeting in the company, on the average 4000 pieces of papers are used and approx. 40 hours of the C-Suite Executives is utilized in preparing, binding and dispatching agenda to the Board Members which imposes huge time and cost burden on the company. C-Suites Executives including Company Secretary spent days, if not weeks, on the physical production and distribution of materials. The US National Association of Corporate Directors’ (NACD’s) Public Company Governance Survey 2013-2014 found that directors spend almost as much time (71.3 hours per month) reviewing reports and other materials as they do (81 hours per month) attending board and committee meetings on average a month. Technology can be used to help boards and directors manage the clutter of information. Companies should automate their operations and board old-fashioned communications.
With the increasing stress on corporate governance, the role of directors under the Companies Act, 2013 (the Act) has come into sharp focus. The Directors are managerial persons and elected representatives of the shareholders. They individually and collectively hold the position of trust and have fiduciary and statutory duties towards the company, the shareholders, and others. They are not agents for individual shareholders or members. The major responsibility of the Board of Directors is to direct the affairs of the company and to exercise such control that the wealth and wealth creating assets of the company are protected. Extensive board responsibilities are found in the Canadian Guidelines which identify five specific components of the board’s stewardship’s responsibilities as follows:
- Adoption of a strategic planning process
- Management of Risk
- Appointment, training and monitoring of senior management, including succession
- Effective communication and
- Ensuring the integrity of corporate internal control and management information systems.
If a director fails to perform their huge fiduciary and statutory duties towards their organization, they are held severally liable. They can protect themselves from liability where they have made a business judgment in good faith for a proper purpose and rationally believed it to be in the best interests of the company. For performing their duties efficiently and diligently in a timely manner, access to proper and timely information for an understanding business of the organization by them is vital. There should be a proper system in the organization for board communication ensuring that no information is left out to be disseminated and proper, transparent and accountable information is disseminated. It has often come to notice that mostly in all big corporate scandals, most of the directors more particularly independent directors could not act in time due to nonreceipt of crucial information from the management of the organization in a proper and timely manner due to which they have to face severe legal battles.
In order to have streamlined, cost saving communication process, more companies are looking forward to having e-boardroom for ensuring intelligent and smart communication between Directors. Most directors are using technology in form of emails, file hosting services such as dropbox, google drive for accessing board papers which are always subject to security risk as files and data are mostly sent without any encryption or password protection and anybody can access the board papers and documents. The right approach is for boards to license and utilize one of the readily available board portal solutions. There should be evolvement from Corporate Governance to Smart Corporate Governance.
A “Paperless Boardroom” also referred as “Digital Boardroom or E-Boardroom” is creating an environment in which the use of paper is eliminated or greatly reduced. It is Electronic document management which replaces traditional ways of disseminating information. It is done by taking board portal solutions which is collaborative software that allows directors to securely access board documents and collaborate with other board members electronically. Most board portal solutions allow access via a number of platforms including personal computers, tablets, and even smartphones.
How does Board Portal work?
- It is a new concept gaining momentum in the past few years.
- It is an Electronic Document Management where iPads or tablets are used by the Board of Directors and C-Suite Executives for disseminating information.
- It is web-based services that centralize all the information and processes that director needs to do their jobs efficiently and effectively.
- It gives secure electronic environment. The administrator of the online board portal can continuously update portal by uploading all information, financial statements, company policies, procedures, newsletters and reports, meeting agendas, minutes for consideration of Directors in time. Directors are assigned user id and password through which they can access all uploaded information, agendas, past or present minutes, approvals, calendar, policies and procedures and even confidential documents 24*7 anywhere offline or online and connect to Board Portal anytime.
- All information and documents can be downloaded by directors online and saved on their iPad and they can take it with them to access it later on even on boarding the plane. Even past meeting’s agendas, minutes and relevant documents can be accessed by them anytime. They can review their board/committee meeting schedules and material in advance anywhere.
- Information can be shared interactively between meetings, written consent can be given by directors on any subject matter, even absent directors can access meetings online.
- By having a video conferencing facility on the iPad, directors can also take part in meetings via video conferencing.
- Directors can store their private notes on reading any information or agenda points which they want to discuss in the meeting without viewing by other directors.
- Directors can leave comments/questions regarding any document, agenda point, they have read. All board members will able to view it and communicate with each other without any delay.
- Quick opinions on specific issues can be done by conducting online polls among all board members via board portal.
- If any contract or document is to be reviewed and signed by any director and when a document or contract is getting closer to the expiration date, then an email reminder can be sent to him for reviewing it.
- Adoption of Digital Board Packages will lead to good corporate governance, more accountability, and transparency, reduce organizational risk, increase better communication and collaboration between directors creating more practical, convenient, green environment in the organization.
- The printing and distribution cost shall be reduced to the extent and there will be improved security a portal offers over a manual process, and the better decisions will be made by the board.
Instead of spending hours after printing, passing and signing the documents, board members and executives enjoy looking at important documents on their computer screens.
It’s the best way to make information available to directors 24/7. If it’s 12 o’clock at night and any director does not remember any point in the contract or policy of the company, he can go in the company’s board portal and refer it.
More and more companies should come forward and adopt this newest technology to make board life easy. E-Boardrooms have therefore is now a vital tool instead of Luxury item for Directors and Management as they facilitate to modernize decision-making process, keep them abreast with the latest and most relevant information to make the best promising decisions, ensure high grade of security resulting in negligible chances of unauthorized access to board documents and information and maintains high level of transparency and accountability in board processes.