Board Portals: Time for a Fresh Look, We Say

Two developments this quarter convinced us that companies should be taking a fresh look at the Board Portals they are using…and how, exactly, Directors are thinking about them…and using them…or not….

The first was a March 7, 2019 posting by John Jenkins on the www.corporatecounsel.net blog  with the results of the survey his firm conducted, as follows;

1. When it comes to board portals, our company:

– Doesn’t have one and isn’t considering using one in the near future – 3%
– Doesn’t have one but is considering whether to use one – 3%
– Adopted one within the past two years – 9%
– Adopted one more than two years ago – 84%

2. For those with board portals, our company:

– Licensed an off-the-shelf portal – 100%
– Built it in-house – 0%
– Hired a service provider to build a custom portal – 0%

3. For those with off-the-shelf board portals, we have:

– Asked whether our vendor has ever had a security breach – 24%
– Investigated our vendor’s security – 48%
– Plan to investigate our vendor’s security in the near future – 14%
– Not worried about our vendor’s security – 14%

Two huge takeaways here: First, almost 100% of all public companies seem to have installed Board Portals - and now - after a few early false-starts, that all went badly - all of them use an outside supplier. So the market seems to be pretty well saturated these days.

But, very scary to note - less than half the respondents say they have “investigated  our vendor’s security” (which is even scarier since it is a mighty vague statement) - and only 24% say they “asked directly” about it!)

And…Hello…Aside from one once major vendor that actually HAD a widespread and well-publicized security breach, there have been numerous other reports - here - and elsewhere in the press - about hackers that have successfully obtained, and traded on sensitive and confidential information by hacking in to company data bases and those of their outside legal advisors too. And geez…these are just the ones that have been caught to date!

If this isn’t something that requires a fresh, and very careful look by corporate boards and by corporate staffers, we don’t know what is! (Your Editor in Chief is on a non-profit board - and even here, while initially some non-profits may think they have no big secrets…WRONG! We worry all the time, and correctly so, about the names, addresses, bios, “giving abilities” and actual donations of real and prospective donors that are tracked in our internal systems…to cite just one example of the woes that could be caused by unauthorized “snoopers.”

The second thing that caught our eye was an article by Val Srinivas, our great friend Robert Lamm, and Tiffany Ramsay of The Deloitte Center for Financial Services and The Deloitte Center for Board Effectiveness - posted on www.CorpGov.com - on the many plusses and minuses of Board Portals, based on interviews with board members and corporate secretaries.

While this article too noted several “security” and cybersecurity concerns - and widespread inattention to the issues, the main takeaway, we thought, was this:

“Too Much Information, Too Little Time…The directors we interviewed felt that they were often deluged with information, and that information overload was especially severe in the financial services industry, with its highly regulated environment. One interviewee lamented that directors continuously receive “reams and reams of information,” often impeding their ability to ask probing questions and potentially diluting their judgment…Another challenge is the tendency to provide a great deal of information in an undigested form, assuming that different board members will want to analyze and classify it in their own way. However, this assumption is rarely accurate,” the paper concluded. “The directors we interviewed stressed the importance of management sending cogent, concise reports and summaries.” (Emphasis ours)

Yes, we are ALL suffering from information overload these days. But the fact that it is “often impeding” the ability of directors to ask probing questions…and “potentially diluting  their judgement” ought to be a very serious call to action!