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In the latest installment of the Salzburg Questions for Corporate Governance, Gigi Dawe, Director of the Corporate Oversight and Governance Department at the Chartered Professional Accountants of Canada, suggests questions for boards to consider operating in an evolving digitized business environment

This article is part of the Salzburg Questions for Corporate Governance series, facilitated by the Salzburg Global Corporate Governance Forum

The digital economy is developing at a breakneck speed, driven by vast amounts of data about virtually everything. Consequently, boards are operating in a complex, data-intense world.

To put this in perspective, global Internet traffic (a proxy for data flows) was:

• 100 gigabytes (GB) of traffic per day in 1992;
• 46,600 GB per second by 2017 and
• 150,700 GB per second is projected by 2022. [1]

Meanwhile, poor data quality costs the US economy up to $3.1 trillion yearly. [2]

Should This Influence Board Structure?

There is a notion that in a fast-paced, digital business environment in which real-time decision-making is required, board composition and structure should be reconsidered. Board structure has remained relatively stable throughout the last century. [3] Boards typically meet four to six times per year plus committee meetings; contact with management is through board meetings, and composition typically reflects executive leadership and industry expertise. However, restructuring to deal with complexity may be antithetical to what is needed from boards. The current structure supports a board's key responsibility – to ensure that an organization's strategy is developed and effectively executed.

Let's not forget that through the COVID-19 pandemic, many organizations were able to adapt and to be innovative and agile – without changing the fundamental board architecture. To excel in a rapidly evolving business environment, boards require adequate knowledge to examine complex issues honestly. However, they are responsible for assessing the strategy and integrating emerging technologies into that strategy, not for the transformation itself.

That said, shifting to a digitized environment involves fundamental changes in an organization's culture, operations, and processes. It requires agility and technical expertise.[4] Does the board's structure then need to mirror those changes? Do boards need to re-think who is sitting at the table, how and how often they meet, and how they respond to real-time challenges without being present in real-time? Yes, I believe they do, but as an ongoing practice, not just in response to a complex digital environment.

I propose the following questions for boards; to honestly and critically assess whether, or how they can adapt to increasingly complex business conditions.

1) Are we open to taking action in areas previously considered outside of our scope …

• to objectively assess a strategy for digitization and whether incremental change or a structural change is necessary?

2.     Do we have the confidence to …

• acknowledge what we don't know?
• learn content outside of our professional knowledge?
• question what we hear?
• demonstrate a voice of reason and stability in a volatile environment?
• resign if it is more than we feel equipped to oversee?

3.     Do we possess the depth of knowledge, leadership, and business acumen to …

• challenge management?
• lead when the organization struggles with increased complexity and real-time decision-making?
• build a strategy that is responsive to complexities but stable enough that it does not create unnecessary anxiety?

4.     Can we be flexible and agile within our current structure to …

• shift how and when we meet?
• make effective decisions in real-time (this may require implementing processes for shorter, more frequent interaction with players previously considered outside of your authoritative scope)?
• leverage the opportunities data and technology present to enhance decision making?

5.     Can we put in the time required to effectively perform amidst increased complexity?

I am interested to learn what you think. What's been your experience? Is there something I've missed? Comment below, and let me know.

Notes

[1] UNCTAD Digital Economy Report 2019

[2] 25+ Big Data Statistics - How Big It Actually Is in 2020? (techjury.net)

[3] Governance Rebooted – Corporate Governance in a Disruptive Digital Age, Creatingfutureus, March 2020

[4] Data Governance Primer – Mastering and Shaping a Data-Driven Economy, CPA Canada, Feb. 2020

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Gigi Dawe leads the Corporate Oversight and Governance Department at the Chartered Professional Accountants of Canada (CPA Canada). She oversees CPA Canada's development of influential, thought leading resources and events that improve board performance. Gigi launched the governance discipline at CPA Canada to facilitate enhanced board and executive response to market demands. Recently she has been actively involved with CPA Canada's initiative to reimagine the future of the accounting profession. Her history includes consulting in organizational development in a variety of industries. Gigi is a board member of Youthdale Treatment Centres. She also co-chairs the International Corporate Governance Network's Corporate Board Governance Committee and sits on the advisory board of Simon Fraser University's Next Generation Governance Project and Advisory Committee of the Canada Climate Law Initiative. She is a past board member of Active Healthy Kids Canada and Family Daycare Services Toronto. Gigi is a member of the National Association of Corporate Directors, the Institute of Corporate Directors, and the International Corporate Governance Network. Gigi obtained a Master of Laws at Osgoode Hall Law School. She teaches Corporate Responsibility and Ethics in the Masters of Financial Accountability program at York University. She 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