Are Hong Kong boards behind the curve when it comes to adopting the latest board support technology? Phillip Baldwin, Head – Hong Kong/ China, ICSA Boardroom Apps Ltd, investigates.
Hong Kong is a dynamic, push ahead, go-getting economic mini- powerhouse with a reputation for being business-savvy and the gateway to mainland China – right? Well, yes and no. Hong Kong companies are very savvy in terms of their focus on the bottom line, but in terms of creativity, not so much. The same, it would seem, applies to technology. Although we love our mobile phones here, we don’t really create much content or new ways of using them beyond ringtones and a few amusing but not very useful Apps for Blackberry (South China Morning Post, 23 August 2013).
This is, after all, the city where the idea of scripless shares was first proposed more than two decades ago in the Ian Hay Davison Report of 1988. The mainland has had scripless shares for a long time, so there is a definite behavioural change that needs to take place in Hong Kong when it comes to implementing and using the latest technology.
This disconnect between boards of directors and technology has been noted before in this journal. As recently as May 2013, the CSj cover story ‘Automation – Meet the cyborg company secretary’ quoted the managing director of a leading compliance software provider as saying that the ‘…fixation with paper is deep in Hong Kong’. As reported in the same article, one year after the Companies Registry launched its e-incorporation service to great fanfare in March 2011, only 11 per cent of incorporations were processed using the digital route – compared with 96 per cent in the UK according to Companies House Annual Report 2011–2012.
Are Hong Kong boards behind the technology curve?
Hong Kong’s digital infrastructure is excellent. Wi-Fi hotspots abound in our city and we are voracious consumers of digital data so why is there a disconnect between the consumer and the boardroom? After all, isn’t it boards that set the direction of companies so that they can sell us all of the digital goodies that we consume so ravenously?
Part of the problem may be the age and homogenous nature of Hong Kong company directors. According to the HKICS report Diversity on the Boards of Hong Kong Main Board Listed Companies (October 2012), most Hong Kong directors of listed issuers (at least those included in the HSI) are male and over 58 years old.
I came across this situation recently which rather sums up the situation in Hong Kong board rooms. Two elderly male directors of a large financial institution which has extensive retail operations in Hong Kong and is pushing its internet services hard, refuse to entertain the idea of a using a paperless meeting solution for its board. Both of these directors sit on the board of another listed entity which does use a board portal so that all of the meeting papers are delivered to an iPad (in this particular case) except theirs. Both directors refuse to give up their paper board packs and yet the very financial institution that they run is pushing more and more of its customers online. That is a massive disconnect, not only from their company strategy but also their customers. In addition they are impeding the operational efficiency of the other company’s board they sit on. Their refusal to entertain the idea of using a paperless meeting solution while at the same time often forcing their customers online are so at odds with each other that it does bring into question their ability to understand the consequences and impact of technology beyond the financial.
1. The gender factor
Women are conspicuous by their absence in Hong Kong boardrooms, with 40% of HSI companies having no women on the board at all. Overall less than one-tenth of directors are women and there has been no substantial increase in women’s representation over the past five years. While having female directors on a board is no guarantee of the adoption of technology, it does at least indicate that the board is open to change.
2. The age factor
According to the HKICS diversity report mentioned above, more than 10% of HSI directors are 70 years old or more. Their age does not, of course, mean that they cannot add value to the companies they direct – they clearly have the benefit of a great deal of experience to bring to this task. However, it is often the case that older directors are less enthusiastic adopters of new technology than their younger peers.
The reality is that directors over 60 rarely have the technological skills younger directors usually acquire from their business and/ or social life. They may not be ‘Luddites’ in the sense that they can recognise the importance of investing in technology to attract customers to buy products online, or to digitalise as much of their operations as possible, but when it comes to the boardroom, older directors tend to be less aggressive in adopting and/ or adapting technology that will make them more efficient and effective.
3. The knowledge gap
Another reason for the slow adoption of new technology by Hong Kong boards may be the lack of information that they receive, particularly about cyber security issues, and the subsequent fear of the unknown makes them more reluctant to adopt new technologies despite often obvious benefits. In this it would seem that Hong Kong directors are not alone.
According to the latest KPMG Global Audit Committee Survey (Security in the Cyber Age), one of the biggest concerns of senior management (which includes executive directors) is information on and about their company’s IT – especially security. Only 26 per cent of those who responded are satisfied with the transparency of cyber security related information. In Hong Kong the situation was even worse with just 20 per cent of respondents satisfied. It gets worse. In Hong Kong only 10 per cent of those who responded were satisfied that audit committees hear views from different perspectives regarding their company’s risk and control environment, the lowest rate amongst the 16 regions surveyed.
The report concludes by stating that ‘In order for business leaders to set the right cyber security strategy, information transparency to senior management has to greatly improve’.
Further credence to this apparent knowledge gap was found in the McKinsey on Business Technology report (number 27, Fall 2013, ‘Elevating Technology on the Boardroom Agenda’). While it deals mainly with the US and Europe, the conclusions seem valid for Hong Kong. It states that boards are beginning to take a more strategic view with regard to how technology trends will shape their future, but goes on to state that in a McKinsey survey of directors, more than half reported that their boards had either just one or no technology-related discussions per year! Again, about half stated that they felt this insufficient. Later on in the same report a Spencer Stuart report is quoted as indicating that about 20 per cent of boards are actively looking for directors with an IT background; a sign that the knowledge gap has been acknowledged and a solution is being sought. I have no information as to whether this is also happening in Hong Kong.
Given the paucity of discussion, information and understanding of technology that seems to abound in boards, perhaps it is not such a surprise that technology and the boardroom have little ‘interface’. Yet there is so much out there that can make directors’ lives easier.
For example, board portals/ paperless meeting solutions allow the company secretary/ legal counsel to control the distribution of and access to information. Basically, they control who gets what and when and, by using a board portal, and do so far more efficiently and effectively, not to mention securely, than using paper packs or email.
Using a board portal, a board pack can be compiled and distributed within 10-30 minutes, rather than the three to eight hours needed for physical board packs. Directors can have access not only to the board papers anytime and anywhere in a secure easy to use and searchable format, but also a whole host of additional information which might be useful when making decisions. In North America and Europe paperless meeting solutions are almost de rigueur for practically every Fortune 500 company and a good many of the Fortune 1,000.
Apart from paperless board packs, there are many technological solutions to
help busy board members meet, share information and make decisions (and reduce the company’s carbon footprint). Here are few of my favourites that might be worth a look.
Video conferencing is not a new innovation but the introduction of high definition and ‘telepresence’ systems in the late ‘noughties’ along with its migration from complex telecommunications systems to the web did produce a boom in the sale and shipping of teleconference systems. And while it is difficult to find figures for the number of Hong Kong board users, according to Forrsights Budgets and Priorities Tracker Survey (Q2 2010), just under half of the IT decision makers surveyed put video technologies – video conferencing, video analysis and other technologies – as one of their top technology priorities. However, although I know a few blue chip companies that use telepresence in Hong Kong, it does not seem to be mainstream which, given the smallness of the city, may not come as a surprise until the China factor kicks in.
Digital paper is a digital pen and paper system that allows board members to make annotations directly onto a live MS PowerPoint. Surely this system should be given some consideration if for no other reason than sparing the board from another verbose and dry PowerPoint presentation!
This Apple product allows members to project content from their iPad, iPhone or even iPod onto a screen (and ties in nicely with a board portal).
This offers an application that has been called ‘PowerPoint on steroids’. It provides data (even live data if required) driven visualisations on screen, making for far more interactive and interesting presentations.
There are hundreds and probably thousands of applications, systems and technological enhancements of ‘old-school’ technologies which could improve the boardroom experience and effectiveness. The challenge for board members is to find the ones that will work for them. At present, I suspect that a few have some, none have all and most have none. What cannot be ignored is the growing disconnect between the business processes being used by companies to sell and market their services and products and the way the board works.
I suggest starting with a paperless meeting solution – a board portal – to manage board meetings and the distribution of board papers. I should point out, in a shameless attempt to appeal to readers of CSj, that this will reduce the hours a company secretary has to undertake the rather menial and unrewarding task of putting a physical meeting pack together. Surely your time can be better spent on governance and compliance issues?
Head – Hong Kong/ China ICSA Boardroom Apps Ltd