Automation – Meet the cyborg company secretary
While technology has transformed many aspects of the company secretary role, fear not, you are not about to be replaced by a machine anytime soon. This month CSj looks at where automation is, and where it is most definitely not, prescribed for today’s tech savvy company secretary.
The concept of ‘automation’ does not generally get a very good press, mainly because of our understandable discomfort at the idea of being replaced by machines. While this threat was a very real one for, famously, skilled textile artisans replaced by the new machines brought in by textile mills in the UK in the early years of the 19th century (the archetypal ‘technophobes’ otherwise known as the luddites) automation also has a less menacing face. At its best, automation means getting machines to do what they do best in order to leave human beings more time to concentrate on the tasks a machine wouldn’t have a hope of completing.
This makes a lot of sense for company secretaries whose functions encompass many tasks where assistance from the right hardware and software is now indispensable (such as organising meetings and keeping company records) and tasks where they have to rely on their own on-board computer (such as advising directors on corporate governance).
This article will look at some of the increasingly sophisticated tools company secretaries can utilise to help them with their administrative functions, while also highlighting the limits of that technology – namely, where company secretaries need to think for themselves.
In theory, if some of the more enthusiastic claims of company secretarial software vendors are to be believed, much of the ‘back office’ work of company secretarial teams can at least partially be automated. Company secretaries have the option of creating automatic reminders and alerts for filing dates. Forms can be pre- populated with the necessary information, requiring only a review and appropriate electronic-signatures for completion. Company secretaries’ regulatory compliance tasks can be monitored and tracked. The need to provide corporate information and documents separately to specific departments can also be removed by a centralised, secure records archive.
This may be the theory but the automated and paperless company secretarial department is not as common in Hong Kong as you might expect. Hong Kong’s affinity for paper records has meant that the adoption rate of electronic records management (ERM) and automation processes has been slower than in other major international centres. Ron Lesh, Managing Director of BGL Corporate Solutions, says that the ‘fixation with paper is deep in Hong Kong. In Australia, the UK and many other places, fully automated systems are used to lodge documents with the regulator, but in Hong Kong company secretaries still seem to prefer to lodge on paper’.
This reluctance to move to ERM systems was also noted by the Companies Registry when it launched its e-incorporation service in March 2011 (see ‘No more paperwork? e-incorporation, one year on’ in the April 2012 edition of CSj). The roll out of the service was particularly welcome to company secretaries who are major users of the service as it permitted both a reduction in the paperwork involved and the time needed to process incorporations (from four days to, potentially, less than one hour). By the end of the first year, however, only 11 percent of incorporations were processed using the digital route.
Mary Defrenchi, Executive Vice-President of Sales and Accounts for BoardVantage, maintains that the long-term trend for the adoption of ERM in Hong Kong is in the right direction. ‘It’s all part of a greater educational process. People are comfortable and familiar with their books, so it’s more of a process change. You have to use it yourself to see how easy it is. There are benefits to ERM – and we believe it is ultimately better than the paper process. If you are moving from a paper-based environment in finance for instance, you might want to use the original accounting documents. We provide familiar tools so people are updating Word and PowerPoint files. So the processes are the same, but materials are all distributed electronically.’
She notes that board portal products, which offer digital rather than paper board books, are becoming more prevalent. ‘We’ve seen an increase over the past 12 months due to the iPad. The systems are becoming mainstream. So many people have iPads and mobile devices as personal items that the adoption rate of electronic records has gone up.’
The main advantage of ERM systems for company secretaries is that the technology adds functionality, including board content control, document collation (for individual browsers), content review for legal approval, vote and results tallies, and written consents for board actions. This can make a lot of the repetitive and labour-intensive aspects of the company secretary’s administrative tasks more efficient – automatically generating the correct forms, minutes and resolutions for companies, based on the business’ jurisdiction’s regulatory requirements.
‘If a document needs to be filed, the software can create the document, distribute it through the portal, provide digital signing for the board and then lodge the document directly with the Companies Registry.’ says Ron Lesh. ‘The software handles everything; it ensures the required documents are prepared, it posts reminders to make sure documents are signed and it reminds the company secretary to lodge documents on time. Our software produces automated email reminders as well as lists of documents that need to be lodged. It was originally designed so people with limited knowledge of corporate work would have the materials to make their lives easier.’
A second advantage of ERM technology is added security. This is a priority issue for corporate boards and company secretaries, as well as for software companies providing ERM services. Records management technology has devised a number of security enhancements in recent years including the ability to control the access rights for different categories of people to files and records depending on their security classification.
This means that company secretaries can determine what information should be accessible by the CFO, CEO or company secretary but remain locked to other board colleagues, and also what level of interaction with the material should be permitted – that is, whether it can be reviewed, noted, commented upon and saved as a shared document with trackability. Also, digital signatures are designed to ensure security while providing audit records for compliance and legal purposes.
‘With tech systems like board portals, the general counsel can retain information within the portal, or you can have a couple of different administrators. You may have the CFO’s office uploading information or doing evaluations – but who sees the information depends on the permissions module,’ says Mary Defrenchi.
Are you ready for the cloud?
Cloud services – the provision of computing resources delivered via the internet – are becoming increasingly popular, although the loss of physical custody of data stored on the cloud is still a major concern. Corporations need certainty that records are secure, but also accessible and comprehensive for audits and discovery purposes.
Many jurisdictions impose criminal penalties for document destruction and alteration, which effectively puts companies on alert regarding their document and records management. Electronically stored documents must live up to the same standard of discoverability as paper ones, and emails, instant messages and other forms of electronic correspondence are under the microscope.
‘With our system, diligence on maintaining records is kept,’ says Mary Difrenchi. ‘But board directors are (rightfully) worried about notes that they make for board meetings in the event they lose their mobile device. With our portal, that information can be wiped from the device because it is made in an environment where it can be controlled to delete or wipe out information on stolen devices’.
With the explosion of new device choices, the need for mobile access is expected
to continue its rapid pace and may ultimately become the primary interface for accessing data and applications. Software companies are working to ensure these new interfaces are still secure. ‘The general counsel can retain the information within the portal, but a director can remove notes that are made to a meeting… and store that information for discovery at a later date.’ As a result, confidential information remains confidential, says Mary Difrenchi.
Many companies remain hesitant to store sensitive data outside their own vaults, however. ‘Our clients don’t use cloud services,’ says Mary Difrenchi. ‘With the cloud the client has no control over where information resides. Our solutions are stored on the premises where the client maintains their own firewalls and security environment. In Asia Pacific, we have a combination of clients who are keeping data on their own servers and others keeping their data on BoardVantage’s portal. We now have a data centre in Singapore to eliminate concerns of national interests.’
BGL Corporate Solutions also offers web- based services, says Ron Lesh, but most Hong Kong clients haven’t expressed a desire to adopt an offsite storage solution as yet.
A trip down the memory hole
ERM is hardly new. From the moment companies started using floppy discs to save documents, records were being stored electronically. Hong Kong, however, has been slower than other jurisdictions to embrace the many benefits of electronic, automated systems for storage partly because the Hong Kong government itself hasn’t defined – or adopted – a comprehensive records management system.
In 2011, the Hong Kong NGO Civic Exchange released The Memory Hole: Why Hong Kong Needs an Archives Law by Christine Loh and Nick Frisch. The report discussed the Hong Kong government’s failure to provide a records management archive. ‘The HKSARG’s archives and records policy, in many aspects, falls short when measured against the standards and practices of some private-sector businesses, international practices, and it cannot even compare to the many bureaus and departments of the HKSAR,’ say the authors.
The private sector standard is much higher than the Hong Kong government’s with regards to document retention and disposal. Civic Exchange notes that the Securities and Futures (Keeping of Records) Rules require records retention from two to seven years. The Companies Ordinance imposes sanctions such as ‘imprisonment and a fine’ to any person who ‘conceals, destroys mutilates, or falsifies’ or ‘parts with’ a company document. The Merchant Shipping (Registration) Ordinance, the Electronic Transactions Ordinance and the Trustee Ordinance, all require document retention in industry-specialised and sensitive areas of business conduct.
Whereas the report authors note: ‘Hong Kong’s public sector is the city’s largest employer, and exercises more influence over the everyday lives of the Hong Kong public than any other, yet its records are not subject to similar strictures’. Given the government’s slow adaptation to archival records management, is it any wonder that some Hong Kong corporations may be lagging in their own adoption of ERM systems?
The limits of technology
Fears that technology will make jobs redundant have been around for quite some time and certainly, in theory at least, ERM and electronic data systems tools should be capable of running themselves, or being run by relatively junior staff. But it is unrealistic to expect company secretaries to be replaced by robots just yet. However sophisticated ERM technology becomes, the important decisions need to be made by a properly qualified and experienced individual.
‘Our system is client specific,’ says Mary Difrenchi, ‘and the limitations on the system are human. We have all the features available for a company secretary to do their board work from beginning to end. They just need to decide how to use it.’
For over two decades, this journal has tracked the way perceptions of the company secretary’s role have changed both in Hong Kong and globally. There has been a steady shift in emphasis away from administrative functions of the role and towards top-level duties such as advising directors on corporate governance. One driver for this trend has been the increasing focus on the importance of good corporate governance and the suitability of company secretaries to serve as companies’ de facto corporate governance officers. Another, perhaps less recognised, driver has been the advancing automation of company secretaries’ ‘back office’ functions since this has highlighted where company secretaries add most value to companies.
As Edith Shih points out in this month’s President’s Message, the growing sophistication of the company secretarial toolkit has served the profession well. ‘In my view, however, this is not only because it has made the execution of many administrative tasks more efficient, but because this efficiency has enabled practitioners to spend more time on the really challenging aspects of the role, such as giving considered advice about regulatory compliance and corporate governance to the board,’ she said.
The Civic Exchange report
‘The Memory Hole: Why Hong Kong Needs an Archives Law’ can be accessed on the Civic Exchange website: www.civic-exchange.org.
SIDEBAR: Best practices for ERM and software management
Tech-savvy administrators and corporate secretaries should revisit and review their processes and software systems to:
- evaluate current tools for how they can be better used to improve business processes
- keep abreast of business operations, for instance consider mobility needs and compliance and look for solutions that best suit a mobile environment
- tell software and technology suppliers what you need and request process enhancements – good suppliers can also suggest best practices to improve processes, and
- figure out what your peers are doing – society meetings and conferences offer forums to learn about new technologies and better processes.