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In the latest installment of the Salzburg Questions for Corporate Governance, J. Kevin McCarthy and James J. Killerlane III outline various processes Boards and directors may have to change in the future
This article is part of the series, the Salzburg Questions for Corporate Governance by the Salzburg Global Corporate Governance Forum
As companies the world over are weathering the initial effects of the COVID-19 pandemic, many have begun adopting longer-term plans and procedures to address the changing landscape and the strategic, operational, technological, and governance issues that have emerged. This crisis has dramatically accelerated the development and implementation of plans and procedures that may have been mere ideas or prospects in many C-Suites nine months earlier. While some of these plans and procedures will disappear after the current crisis has abated, many will become part of the “new normal.”
As the steward for the efficient and effective administration of her company, the corporate secretary will be looked to for leadership in the development of sound and sustainable corporate governance practices that adequately address emergent company needs in the “new normal.” In this regard, there are several developments in corporate governance to consider for the long term.
COVID is the kiss of death for paper copies of materials, and secured online portals (if not already) will be the new standard for the distribution of materials to directors in advance of meetings. Although they present a unique set of challenges (both internally and to the directors themselves), remote meetings and remote attendance will be more universally accepted. It is important to ensure directors have access to video capability for meetings to maintain an active Board dynamic. Consideration should also be given to the design of meeting agendas and when scheduling meetings in light of a remote or hybrid meeting dynamic (i.e., to facilitate breaks and recesses or account for the absence of travel).
Board logistics will generally have to adapt to a remote or hybrid environment (i.e., meeting security and in-house technical support, facilitating and fostering of director discussion and challenges of management, and managing executive sessions). Hosting platforms such as WebEx or Zoom should be used to avoid hacking, and members of a company’s internal technology team should satisfy themselves that there are adequate protections in place. Additionally, directors, executives, and presenters all should be offered training on the different technologies to be used at the meetings to provide for a smoother, efficient meeting and ensure the protection of confidential information.
If they have not already done so, Boards should consider the fact that they may not physically meet potential directors before the candidate’s appointment to the Board. Nominating/governance committees must factor in new methods for vetting candidates and socializing new directors. To the extent applicable, companies should capitalize on the resources and experience of the search firms they engage, as well as those resources available through their Board portals.
In light of the challenges remote onboarding presents, organizations should create a digital onboarding manual for new directors that can be updated dynamically based on the director’s stage in the onboarding process. The manual should provide an outline of all documents that prospective directors (initially, prior to appointment) and then director appointees receive as part of their Board service. The manual should also address the sequencing and suggested points of discussion for meetings with senior management and other members of the Board to facilitate the new director’s integration. Practically, most companies will have these documents saved digitally as a matter of course. Still, it will become increasingly important to have such documentation efficiently organized, readily available, and regularly updated.
Companies should review their by-laws and governance documents to facilitate, to the extent permitted by applicable laws and regulations, the proliferation of digital processes and capabilities. The corporate secretary will need to adopt appropriate procedures and controls accordingly. For instance, although many may resist, companies will use digital signature platforms to sign documents to the extent permitted by local law. Moreover, boards will approve the use of digital corporate seals. Foreign certifications, such as apostilles, will adapt to accept digital signatures.
Although still important to have a secured minute book room, digital storage for Board minutes and company records (and its proper maintenance) will become a necessity. This is especially critical in light of the continuing evolution of the law surrounding shareholder access to books and records. In light of these developments, the role of the corporate secretary will continue to evolve, and this “new normal” will necessitate a greater focus on the technological, risk management, and operational capabilities of the corporate secretary’s office.
This list is not exhaustive, and there are other developments we may not have mentioned. Comment below and let us know how else Boards should be prepared in the short- and long-term.
We encourage readers to share your comments by joining in the discussion on LinkedIn
James J. Killerlane III is the corporate secretary, managing director and deputy general counsel of BNY Mellon. Jim oversees all corporate governance and securities matters at BNY Mellon and supports the Board of Directors for the BNY Parent, Institutional Bank, and Wealth Bank. He is also a member of the legal department’s senior staff. Before joining BNY Mellon in April 2019, Jim was an Assistant Secretary and Associate General Counsel at AIG where he was the Head of Securities and Corporate Governance. Prior to AIG, Jim worked in senior roles at Morgan Stanley and Lehman Brothers where his principal areas of oversight included SEC and other public disclosure, corporate governance, Dodd-Frank and Sarbanes Oxley related matters. He currently serves on the National Board of the Society for Corporate Governance, and previously served as the President of the New York Chapter. Jim serves as the Chairman Emeritus of the Junior Council of the American Museum of Natural History and also serves on the Board of the Red Bull Theater and several non-profit institutions. Jim received a J.D. from Fordham University Law School and an A.B. in politics from Princeton University.
Kevin McCarthy is a senior executive vice president and general counsel of BNY Mellon. A member of the company’s executive committee, Kevin heads BNY Mellon’s global Legal Department, and also has overall responsibility for government affairs, the corporate secretarial function, and global corporate security. Kevin was appointed to his current position in April 2014, after serving as senior deputy general counsel since 2013, where he had assumed additional responsibility for the legal teams supporting the company’s asset servicing businesses and corporate center functions. He joined BNY Mellon in 2010 as deputy general counsel and led the Litigation, Enforcement and Employment Law functions. Prior to joining BNY Mellon, Kevin was general counsel of Cowen Group Inc., a diversified investment bank and financial services firm. From 2004 to 2007, he was a partner at Wilmer Hale, focused on securities and litigation matters. From 1996 to 2004, Kevin was at Credit Suisse First Boston in a variety of roles, most recently as managing director and global head of litigation. Kevin began his legal career as an associate at Willkie Farr & Gallagher. Kevin is a member of the Board of Trustees of the National September 11 Memorial & Museum, The Legal Aid Society, Albany Law School of Union University, International House, and the Cameron Kravitt Foundation. He is also the chair of the Clearing House Association Board of Directors. He received his J.D. from Albany Law School of Union University and a B.A. from Siena College. Kevin is a Fellow of Salzburg Global Seminar.
The Salzburg Questions for Corporate Governance is an online discussion series introduced and led by Fellows of the Salzburg Global Corporate Governance Forum. The articles and comments represent opinions of the authors and commenters, and do not necessarily represent the views of their corporations or institutions, nor of Salzburg Global Seminar. Readers are welcome to address any questions about this series to Forum Director, Charles E. Ehrlich: cehrlich@salzburgglobal.org To receive a notification of when the next article is published, follow Salzburg Global Seminar on LinkedIn or sign up for email notifications here: www.salzburgglobal.org/go/corpgov/newsletter