The corporate financial scandals of 2000s gave birth of the need for a more efficient board meeting process that would make board meetings not only convenient, but also compliant to the newly developed Sarbanes-Oxley Act. Board portal products faced serious difficulties in finding their place in the market in subsequent years. However, in the last decade, the scenario has changed dramatically. Board portal technology has gained tremendous popularity and is being increasingly considered indispensable by organizations all over the world.
In the late 1990s, the Internet was quickly becoming a mainstream technology. People were buying personal computers, availing the services of ISPs and going online to explore what the World Wide Web had to offer.
By then, forward-thinking directors were starting to think of ways to use the Internet for digitizing the board meeting process. But technology was limited, so it would take until after the new millennium before the board portal — referring to both the technology and the term — was formally introduced in the market.
Preceding the board portal was the “electronic board book” which, in effect, was nothing more than an online storage for board meeting materials. It did not do much in terms of facilitating collaboration or managing board meetings, but it revealed that there was a significant market for software that could fully digitize the board meeting process. It was enough to lay the foundation for the board portal.
Then, the financial scandals in the early part of 2000s happened with the most controversial one being Enron, a multi-billion corporation founded in 1985. It was one of the biggest companies not just in the United States, but also the world.
The Enron Scandal
Beyond electricity and natural gas, Enron branched out to communications and paper and pulp industries. By 2000, it had around 20,000 employees on its payroll and $101 billion in revenue. It hit a record high of $90 per share, and Fortune magazine even named it “America’s Most Innovative Company” for six straight years. At the time, Enron seemingly had no way to go but up. No one would have believed that just a year into the new millennium, this energy giant would implode and file bankruptcy, leaving employees with no jobs, and investors with major losses.
By December 2001, Enron was discovered to be involved in a well-planned and well-executed accounting fraud.
Here is how it went down: CEO Jeffrey Skilling and CFO Andrew Fastow developed a complex system that hid the company’s debts amounting to billions of dollars. They also managed to fool Enron’s board and audit committee into thinking that the company was performing excellently in terms of revenue generation.
Then, the telecom industry experienced a downturn, so Enron’s stocks began to decline. Skilling stepped down as CEO on Aug. 14, 2001, citing “family issues” as the stock prices continued to fall. Taking his place as CEO was Enron’s chairman Ken Lay.
The scheme started to unravel from within when Sherron Watkins, a VP at Enron, sent Lay an anonymous letter claiming that Skilling left because of his fraudulent activities. She also pointed out her doubts about the authenticity of Enron’s accounting methods.
Enron’s stock prices plunged to 30 cents a share, and the company declared a third quarter loss amounting to $618 million. The Securities and Exchange Commission (SEC) started an investigation, causing Enron officials to admit that they exaggerated company earnings to attract investors. On December 2, 2001, Enron was officially bankrupt. Later on, Skilling and Fastow were thrown into jail. Lay died of a heart attack before getting convicted.
The Sarbanes-Oxley Act of 2002
Aside from Enron, other companies such as WorldCom, Adelphia and Tyco International also got involved in financial scandals. In response to these breaches in business ethics, a new U.S. federal law was introduced, the Sarbanes-Oxley Act of 2002. Named after Sen. Paul Sarbanes and Rep. Michael G. Oxley, two U.S. lawmakers who co-sponsored the act, the law requires public companies and accounting firms to adhere to stricter standards when making corporate disclosures, such as earnings and losses.
Even though this is just a U.S. law, the effects are felt worldwide. After all, many multinational corporations are headquartered in the United States. Foreign companies who do business in the country are also required to comply.
The development of new technology and the rise of corporate scandals amplified the need for more efficient board meeting processes that would make board meetings not only convenient, but also compliant and secure. In 2002, BoardVantage was one of the early providers of such software. The company received VC funding along with others offering similar services.
However, the market for the electronic board book (the term ‘board portal’ didn’t exist yet) was still a niche. Only the C-suite crowd had use for it, and even then, its functionality as limited to accessing meeting documents on bulky laptops. There was not much that could be done with it.
It would take three more years, in 2005, before the board portal as we know it became a well-defined category in the market. It took time for technology to develop and for corporate boards to warm up to the idea.
What started out as a simple storage for meeting documents back in 2002 evolved into a comprehensive board portal solution a decade after. Although BoardVantage was a pioneer, major players like Boardbooks, BoardPad and Convene entered the picture later to significantly improve the board portal technology.
In 2000, AIG SunAmerica wanted a web-based system that streamlined and centralized the delivery of board meeting materials. They wanted the system to be easy, flexible, and user-friendly. More importantly, they wanted it to be secure.
Diligent Boardbooks responded to AIG SunAmerica’s need. As a result, the concept behind Diligent Boardbooks was launched. BY 2002, Diligent Boardbooks was trying to find a market for their system.
BoardVantage, too, was among the first providers of electronic board books in the early 2000s, having received VC funding in late 2002. But as mentioned in a previous article, these electronic board books served as a secure storage for meeting materials, and nothing more. They enabled board members to do away with heavy board packs, but the rest of the board meeting process remained more or less the same.
Also, back then, the common solution for organizations that wanted to go electronic was to develop their own electronic board book using their existing IT infrastructure. There was a lack of demand, and therefore, a lack of providers, so organizations didn’t have much choice in the matter.
This first stage in the history of board portals is commonly referred to as the “access” stage, as mentioned in Boardvantage’s whitepaper on the topic. Back then, electronic board books existed mainly as a passive tool that board members accessed to download or upload their meeting files as needed. And for a while, that was enough.
But as technology got better and corporate governance got stricter, it became more apparent that a system for the board meeting process needed to be developed. The Sarbanes-Oxley Act of 2002 required organizations to be more transparent in their reporting, so there was the need to document everything. Hence, the next stage in the board portal evolution is the “process” stage. This was around 2005, when the term “board portal” finally came into existence. Instead of just focusing solely on the needs of board members, board portals addressed the needs of corporate secretaries, too. Scheduling board meetings, sending out invitations, preparing board packs, taking down minutes of the meeting and other tasks became doable on board portals.
Organizations were gravitating towards providers as well. True Value, an American chain of hardware retail stores, tried to create their own board portal, only to have their board members say that the system developed for the company was too hard to use. True Value, in the end, opted for the services of BoardWorks.
Around this time, more providers started to offering their own board portals: BoardEffect, Director’s Desk, and BoardPad were just a few.
But the real game-changer was the iPad, which was first released in 2010. Instead of bulky laptops, board members could use these handy tablets in board meetings. For the first time, board members were truly mobile, making it possible for them to work with one another wherever they might be. With its multi-touch capability, users could also write and draw directly on the iPad, just like on a paper, breaking down barriers even further. These attributes paved the way to stage three, the “collaboration” stage. Finally, the technology needed for remote board meetings already existed, and providers were quick to realize that.
Amongst the members of the new generation of the board portal market is Convene, launched in 2012. Although it competes with established names in the industry, the timing of Convene couldn’t be more perfect. It entered the market just when cloud computing and mobile devices were taking off, so it was able to harness these technologies to become the comprehensive board portal solution it is now. Convene works on iPads, iPhones, Android, and Windows devices; at the same time, it is backed by a secure web portal hosted either on Amazon Web Services or users’ own servers.
From mere file servers to comprehensive solutions, the board portal has, indeed, come a long way. So what will the future of board portals look like? It all depends on the technology that will be developed in the next few years. Perhaps holographic board meetings will become as commonplace as remote meetings are now. That, we have yet to see.