Digital transformation has always been an integral part of corporate development. It has been a key consideration for successful business growth since the 90s. This has become increasingly rampant this past year due to the pandemic.
Digitalization has unlocked many opportunities for organizations. However, digitalization spans different regulatory regimes, and this can cause a lot of transversal challenges to businesses. Consequently, digitalization has opened new challenges for organizations all over the world on how they should manage their business across all levels.
This runs especially true with how boards operate and communicate. As boards from all over the world begin to reimagine how their board should work, they need to go digital in their boardroom as soon as possible. With proper business integration and implementation, digitalization can ensure efficiency, effectiveness, and continuity of the organization.
Learn how boards from different countries continue to keep up with the challenges, demands, and impact of digitalization in the boardroom.
The Singaporean government was quick on its feet when the pandemic peaked in April 2020. They were able to “install a circuit breaker” for businesses in the country. Within a month, the government legislated a set of temporary measures to respond to COVID-19. They established a necessary regulatory guide to support businesses strive and remain afloat.
According to Raymond Lam, CEO of DrewCorp Services, “for Singapore, we are quite fortunate because a lot of COVID-19 measures are in place, and we have very clear regulations on how to conduct meetings digitally”. The government ensured that picking up the trend in the future must remain in their vision. They nee to do so as they start to make amendments to the Singapore Companies Act.
“The government is looking at having digital meetings specifically allowed under the Singapore Companies Act, which will probably happen at the end of this year. So by then, regardless of what the Constitution says, the law would allow for digital meetings,” added Lam.
Similarly, the Kenyan government also showcased a quick response to support organizations during the pandemic. There was a unified effort from the government and regulators in creating an environment wherein companies could continue to hold meetings virtually. Even though the new regulation did not specifically provide for digital meetings, the courts eventually decided and allowed virtual meetings.
Immediately creating regulations allowing virtual board meetings became the defining factor for companies that have remained operational during the worldwide lockdown. To move forward, boards and organizations needed to adapt quickly to remain productive.
Early Preparation and Flexibility
In India, the Companies Act was completely replaced way back in 2013. During that time, a legal framework for holding video and audio conferencing for board meetings had been established. The concept of conducting virtual meetings was already set in place since 2013 and was considered legally valid.
Eventually, the Institute of Company Secretaries came up with the new regulations and framework on how to conduct virtual board meetings. During the recent pandemic, the rules have been further amended. This established provisions on how to count proxies and record meetings, among other stipulations. Currently, there is a lot of flexibility available to the board on how they communicate and conduct their board meetings.
On a global scale, it is necessary to see how organizations that work globally should conduct board meetings. As Nitin Potdar, M&A Partner at J. Sagar Associates, puts it, “due to globalization, European and US companies have subsidiaries and affiliates in India, and in Singapore. Everyone is doing global business now, and you can’t have different rules for holding board meetings for different countries.”
Ease in Regulation
The United States was not spared from the economic challenges of the pandemic. However, thanks to digitalization measures across the country, businesses in various industries were able to remain operational.
One of these digitalization measures is virtual communication. Similar to regulations in India, digital boardrooms are not new in the United States. However, the pandemic unlocked the full potential of virtual boardrooms.
Certain states with laws banning virtual board meetings eased their restrictions. This is critical for the US since it is such a big country. For instance, when a company has directors in different states, directors still need to find a way to meet despite the imposed travel restrictions. Thus, conducting meetings virtually had been their only option.
To regulate the use of technology especially in the boardroom, the government put in place measures to mitigate any potential problems boards may encounter. During the first quarter of 2020, some states such as Delaware already allowed boards to conduct virtual board meetings following certain conditions. An example of regulatory stipulation is proper authorization, coordination, and procedure implementation of virtual meetings by the board itself.
New York is another state that provided guidelines in conducting virtual meetings. Following an October 2019 rule change, New York is one of a few states that allowed hybrid board meetings – a meeting that includes virtual elements while still conducting in-person meetings.
With the US government’s adjustment to the situation, boards in the country were able to meet even though they were unable to physically gather. This allowed boards throughout the country to continue planning changes to their business strategies. Through virtual board meetings, boards were able to provide the proper direction for their organization.
Supporting the Transition
In Kenya, guidelines on conducting virtual board meetings served as great support for businesses. The government provided support to businesses by opening up review systems. These review systems could be used to review and grant approval for the use of these digital tools.
With these national corporate guidelines, boards in the country can now more effectively choose the best platform for their meetings. This support is extremely helpful for businesses that are undergoing their digitalization process.
“It progressed very well and very quickly. There’s a move from the State Law Office to amend the companies to provide specifically for the holding of virtual or hybrid meetings,” said Waweru Mathenge, Chairman of the Institute of Corporate Secretaries in Kenya. Through the efforts of the government, boards were able to continue meeting the statutory obligations to continue holding board meetings seamlessly.
In the same way, the Singaporean government’s support on businesses focused on creating regulations on how to go digital in the boardroom. Part of the provisions in the legislation on conducting virtual board meetings includes guidelines on attendance checking, board member conduct, document presentation, quorum counting, and voting process.
Taking these detailed measures into consideration, boards in Singapore were able to restructure how they conduct board meetings. These guidelines provided a more relevant structure on how companies continue their digitalization in their boardroom. Overall, the government’s focused support coupled with boards’ rapid response helped organizations to adapt more easily amidst the pandemic.
One of the most important factors to consider in thinking about standardization is the pace of digitalization. Its impact on societies and markets varies in different countries. Considering the varying approach and turnout of digitalization in different countries, boards should be on their way towards implementing digital transformation for better corporate governance and business continuity.
Embrace the changes brought about by going digital. Convene can help you take the first step toward digitalization in the boardroom.