Board portals – a company secretarial perspective
CSj interviews company secretaries in Hong Kong for their views on how board portals have impacted their work, which systems they prefer and why the old-school paper system is still favoured by some.
Board portals first came to prominence in the early 2000s, and were used primarily as a hands-on tech tool to simplify document administration and improve communication with and among board members. However, portals remained a rarity until the appearance of the iPad in 2010 which made it increasingly easy to access and manage relevant board material on a tablet. The other factors that propelled market development included a group of progressive directors who were simply weary of bulky board books and, being enthusiastic about technology, promoted electronic access to meeting materials, although the early portals did little more than provide basic online access.
The second driver in the US, which was where board portals were pioneered, was the passage of the 2002 Sarbanes-Oxley Act which threw a spotlight on board portals as a vehicle to drive governance enabling directors to access vast amounts of information immediately.
Hong Kong’s approach to the board portal, however, differs in some important aspects to the approach taken in other developed jurisdictions. Firstly, the market is relatively small compared with the US, UK, Europe and Australia. Phillip Baldwin, Director of software firm ICSA Boardroom Apps Ltd which sells the ‘BoardPad’ system, says that most medium-sized and small listed firms in Hong Kong are not using a board portal system. ‘In the US and Europe the question is which system to use. In Hong Kong, the question is rather if they should use a digital system at all. It’s a developing market’, says Mr Baldwin. He speculates that this may be because many Hong Kong companies have primarily local operations and market reach, and are often run by families where decisions can be made around the dinner table.
Secondly, while most of the 50 largest listed companies have some sort of board portal system, some have developed their own system and most want to host their portal on their own servers. Mr Baldwin estimates that some 85-90% of companies in Hong Kong host their portals internally. In the West, the ratio is the opposite; 85-90% use a hosted system, often in the UK, US or even a local data centre. Most board portal providers don’t offer this option and so companies must use a cloud-based hosting service. ‘For local companies there seems to be a reluctance to outsource the hosting of information, while this isn’t an issue for our service which can be hosted in-house or in our data centres, it does limit choice and many companies want at least three options to look at. That said, the market is developing and growing steadily here and the Mainland market has huge potential,’ says Mr Baldwin.
James Wong, Chief Executive Officer, Computershare Asia, points out that board meeting materials sometimes contain price-sensitive information and this is one of the reasons companies prefer to keep such data on their own servers.
Lenovo, the world’s biggest PC maker, is using an in-house board portal developed by its own team. When the company first started looking at switching to a digital board pack in 2005, there were not many options on the market, remembers Eric Mok, Company Secretary and Assistant General Counsel at Lenovo Hong Kong.
‘We were among the first listed companies in Hong Kong looking at board portals’, he says. ‘At the time there were no such software companies in Hong Kong and we had initially only contact with suppliers in the US’.
After Lenovo’s acquisition of IBM’s Personal Computer Division, the company was looking to implement an American style of board management, Mok says. Due to confidentiality requirements regarding internal information and the lack of software options in Hong Kong, they chose to develop their own board portal system.
‘At the time, it felt more safe. We didn’t have to deal with confidentiality issues when using our own system in the same way as if we were to use an external system’, he says. ‘I’m sure many positive things have happened in the market since then and that there are many very good board portal companies’.
A digital meeting solution is also preferred as Lenovo often holds its board meetings in different cities across the globe. Eric Mok explains that the system works effectively from the board’s perspective, although not being as fancy as other systems on the market.
‘It serves the purpose of keeping all board materials on hand and delivering board materials to directors. A high level of confidentiality is of great importance, so we are happy with this system, although we are always looking for enhancements and improvements’.
CK Hutchison Holdings also opted for an in-house board portal system when it set up its own system back in 2008. Edith Shih FCIS FCS(PE), the firm’s Head Group General Counsel and Company Secretary, says the system has delivered on its promises – it has simplified document administration, improved the level of communication with directors and saved a lot of paper.
‘We don’t have to be Hercules and lug heavy box files around. Many of our directors are tech-savvy and welcome the use of board portals. We can send communications anytime during or after office hours, especially board papers. The directors can also access board papers anywhere and anytime. We save manpower on physical delivery of board papers and can reach out to directors anytime,’ she says.
Confidentiality and data security were again part of the rationale for opting for an in-house system. The system ensures that communications are only accessed by the intended recipients and do not have to go through secretaries or other intermediaries. In terms of record keeping, however, the company still keeps hard copies. ‘We would not just rely on the portal, that is, we always keep a hard copy on file,’ Ms Shih says. Moreover, the portal has not replaced the existing channels for board communication.
Ms Shih’s advice to other companies planning to switch to a board portal is first and foremost to seek advice from the company secretary. ‘When the company secretary understands how to operate the system, the directors are more likely to make use of it,’ she says. She also highlights the importance of using a system that is easy to operate and suited for the specific needs of the relevant company. ‘Use a simple system, adequate for the objectives one wants to achieve. There are many fancy systems in the market. If you need a Toyota, don’t pay for a Ferrari.’
Another key aspect to consider in the switch to a board portal is that the transition will inevitably involve changes in the way directors receive and interact with board documentation. At a minimum, companies have to ensure that directors are well briefed on how to access and use the portal. Ms Shih points out that there will usually be some directors who opt not to use the portal – enforcing use of the paperless board pack and communication system from day one might therefore be difficult to implement, but in due course those directors might retire or might learn to use the portal. The Hutchison system now needs relatively little IT support, she adds. From time to time passwords need to be reset, but generally the system runs smoothly.
Jardine Matheson introduced a third-party board portal in 2012. Neil McNamara, Group Corporate Secretary and Director of Group Corporate Affairs, says that the main goal in implementing the system was both to reduce the amount of paper being used and to better connect board members in different parts of the world. The system runs on the company’s own servers.
‘We have directors in different jurisdictions and we thought it would be more convenient for them to access board papers via a board portal,’ Mr McNamara explains. He adds that Jardine Matheson chose a system it could host on its own server and it has been well received by directors, although the company is in an evolutionary stage of implementation.
‘One of the problems initially, and still, is the complexity of annotation and mark-up tools. Some directors still like to write things down on paper’, he says. ‘But I think over the next couple of years, people will find it easier to use a tablet as the products on the market become more sophisticated.’
Technological advances are steadily improving the usability of digital systems. The new iPad Pro, for example, has been enhanced with a larger A4 size screen and the Apple pencil, which allows you to draw and write with precision. ‘You can now write on the screen much more accurately than in previous systems,’ he says. ‘It is also convenient for directors going on flights to bring the iPad to look at documents, and for the meeting organisers it makes the process of updating and revising the board papers more streamlined and effective. It provides much more flexibility in using the content.’
However, for company secretaries, using a board portal can make life both easier and more difficult. ‘As we don’t require people to use iPads, there are still many people using paper versions. So it actually makes our life more complex,’ he says. ‘But I suppose it’s just a matter of time before more people will move across to the iPad version as they get more used to it. It’s a transition mode.’
Hong Kong Rugby Union (HKRU) opted to have its portal hosted externally on the provider’s server. The organisation’s CEO, Vern Reid, says the HKRU was looking to create paperless boardroom meetings and to increase the board’s efficiency. ‘Apart from all the obvious features, such as being able to track documents relatively easily and to call up previous board minutes, the great attraction for me is to being able to – even in the eleventh hour – upload additional material ahead of a board meeting,’ he says. ‘This is a key component that I really like.’
Anson Bailey, a member of the HKRU board, says that the new system has made life easier and that the transition from paper to digital has been smooth for all board members. He highlights the fast recall of previous meetings minutes and late upload of last-minute papers as useful features of the software. ‘One of the challenges is that we are faced with an increasing amount of data and so we really need the portal to provide us with the facts and figures at our fingertips where we can refer back to various data points in previous board minutes or spreadsheets. It helps to collate a lot of data, so if you need to check something from previous meetings you can easily do so,’ says Bailey, who is also the Principal of Business Development at KPMG in Hong Kong.
He also points out how easy it is to take the iPad out when travelling to your office or a meeting and have some downtime, and quickly read through documents and agendas. ‘The ease of using the portal is really important, especially when you’re dealing with time-starved senior executives. It’s important that the system helps to save time,’ he says. His advice to other companies and organisations contemplating switching to a board portal is to ‘do your homework’ and find a system suitable for your needs.
The enduring appeal of paper
As mentioned at the beginning of this article, the uptake for board portals has been relatively slow in Hong Kong. There can be diverse reasons for resisting the move away from paper. CSj talked to the MTR Corporation Ltd as one of the large-scale companies that haven’t made the switch to digital board packs. Gill Meller, Legal Director and Company Secretary of MTR Corporation Ltd, explains that the company’s previous chairman – who stepped down on 31 December 2015 – preferred to use paper and there wasn’t really a strong push from other board members to change to a digital format.
‘It’s just a preference. There are certain things you do on a screen and other things you may like to print and read more closely. I guess some share this old-school approach. You read things sometimes in more depth if it’s on paper. On a screen you tend to scan through,’ she says.
The fact that all board members are based in Hong Kong also makes it less urgent to move to a digital solution, Ms Meller adds. ‘But I can absolutely see the benefits of having an online solution. For example, it would make it easier for board members to dig out documents from previous meetings,’ she says. ‘I will raise the issue with our new chairman. We should be asking ourselves whether this is a switch we’d like to make.’
A number of board portal suppliers have opened offices in Hong Kong in recent years, including those listed below.
Azeus Systems Ltd www.azeusconvene.com
Boardvantage Inc http://boardvantage.com/hk
Diligent Corporation http://diligent.com
ICSA Boardroom Apps Ltd www.boardpad.hk