Posted by: CS Shilpi Thapar
With the increasing stress on corporate governance the role of directors under the Companies Act, 1956 (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:
1. Adoption of a strategic planning process
2. Management of Risk
3. Appointment, training and monitoring of senior management, including succession
4. Effective communication and
5. 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 judgement 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 of proper and timely information for 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. 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 non receipt 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.
It is often seen that for conducting a single meeting in the organization, on the average 4000 pieces of papers are used and appox. 40 hours of the C-Suite Executives is utilized in preparing, binding and dispatching agenda to the Board Members which imposes huge financial burden on the organization.
In order to have streamlined, cost saving communication process, more companies are looking forward to having e-board for ensuring intelligent communication between Directors.
A “Paperless Board” also referred as “Digital Board or e-Board” 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.
How Digital Board Packages works?
- 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 an online board portal of the organization.
- It is web-based services that centralizes 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 in 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.
- 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.
Hence, 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 organization, they he can go in the organization board portal and refer it.
More and more organizations should come forward and adopt this newest technology to make board life easy.