What's fueling the digital shift in many corporate boardrooms?

Oil and gas company boards look a lot different today than they did a few years ago.

July 1, 2011

7 min read

Marc Daniels, Diligent Board Member Services, New York, NY

Oil and gas company boards look a lot different today than they did a few years ago. New technology is propelling the industry forward at all levels, from parts manufacturing and pipeline transportation to the C-suite and corporate boardroom. The introduction of the Apple iPad has accelerated the transition – prompting oil and gas boards to trade paper-filled binders for web-based systems to house their board books and materials.

Prior to the digital shift (and for some companies who have not yet made the transition), corporate secretaries and administrators would spend weeks producing and gathering the appropriate materials for each board meeting. They were responsible for printing, binding, and shipping board materials to directors around the world – a process that could take hundreds of man-hours, and run upwards of $100,000 a year in materials, services, and labor costs.

Transitioning to electronic board books would seem like a logical and relatively easy solution, however security and discoverability issues kept many companies from making the shift. In addition, some directors who had been relying on paper books for decades were skeptical of electronic materials and uncomfortable with the technology.

A combination of improved third-party software and the release of the Apple iPad allowed many companies to break through this discomfort and make a successful switch to web-based board portals. Today, most oil and gas companies house all meeting documents, reference materials, archives and other board information within online portals operated by third-party vendors and backed by teams of IT and security personnel. The iPad was also responsible for the more recent acceleration of the digital transition, as even the less "tech-savvy" directors were receptive to its intuitive interface and the book-like look and feel.

An oil and gas board meeting today is more likely to consist of directors on iPads, rather than conference tables piled with paper books. Directors say accessing their information electronically is easier, faster, and more accurate, especially when dealing with increased regulation and oversight, reputation management, and the location-based challenges of a global business model.

Regulation and oversight

The slew of new industry regulation and scrutiny in the past year has increased personal liability for directors and demanded more of their time outside of traditional quarterly board meetings. The Deepwater Horizon oil spill prompted the introduction of an additional 150 bills in Congress designed to increase government oversight and safety measures.

This means a few things for oil and gas boards. First: more meetings, especially for directors on committees where more time and attention are required outside of the regular board responsibilities. More meetings result in more Fed-Exed binders of paper materials, more time and investment on behalf of the corporate secretary and administrative staff, and more opportunity for error. Online portals and electronic information can simplify the process from all angles, delivering materials instantly and allowing for "real time" updates so directors are all looking at the same version of the book and no one is left with an outdated copy.

This also means more visits from regulatory bodies. Board materials can be subject to audit and review at any time. Keyword searchable archives have transformed the audit process, which used to require days and sometimes weeks of paging through paper archives looking for a certain note or meeting minute. Most web-based board books today allow corporate secretaries to create a guest account for regulators – allowing them to log into the system and review pre-determined documents on their own time, from any location.

Crisis and reputation management

Recent events have required enhanced crisis and reputation management from boards, and the ability to respond in real time, 24/7 from anywhere in the world. New technology has been essential in allowing directors to meet via videoconference on a moment's notice. Instead of waiting to receive documents via Fed-Ex or risking sending confidential information via email or fax, directors can view crisis materials electronically. Board-specific platforms offer the most advanced security features and a team of IT and security professionals monitoring for security breaches at all times.

In the event of a natural disaster, board portals have allowed companies to maintain "business as usual." In 2010, the volcanic ash cloud that grounded flights across Europe caused business interruption in nearly every industry. For those oil and gas companies whose directors were impacted by the inability to travel, board portal technology was critical in allowing them to join meetings remotely and fulfill their responsibilities without interruption. Some said that even a year or two ago, that situation would have caused a major disruption for the company, but this year they were able to manage through the situation without incident.

With environmental issues under a microscope in the oil and gas industry, the idea of being paperless and "green" is also a benefit and a boost to corporate image. The move to electronic board books often coincides with an overall corporate strategy to be paperless and environmentally conscious.

Global footprint

The oil and gas industry is inherently global, and boards often span countries and continents. Even for companies with a majority of directors based in the US, regular travel to visit rigs and drilling sites in the Middle East, Europe, South America and elsewhere make urgent last-minute board meetings difficult to coordinate. As technology improves however, directors are able to be virtually present at meetings regardless of their location.

Board portal technology also allows companies to recruit and retain more qualified directors from around the world by easing the logistical burden. There is also a significant cost savings affiliated with using a portal for global directors as the company no longer bears the cost of shipping documents internationally and flying directors in for every meeting.

Advancements in technology have helped oil and gas directors to be more efficient, accurate, and accessible. Within the next few years it is expected that all industry boards will be operating electronically, freeing up valuable time and resources for directors and corporate secretaries to focus on governance, regulatory issues, and ultimately, growth.

Here are 10 points to consider when going digital:

Security – Is the hosting environment secure, audited by a third-party IT security firm, is it fault tolerant, and is all data transmitted using encryption as well as stored using encryption? Be sure the board material, if stored locally on the board members' laptops or iPads, is encrypted.
Experience – How long has the vendor been providing the service, how many clients do they have, and do they have experience with healthcare providers?
Ease-of-Use – Simplicity is key to member usage, acceptance, and ultimately to the success of the project. If using an Apple iPad, make sure the board material is displayed in an intuitive book reader interface.
Software Development – Make sure the vendor stays current with the latest technologies, including iPads, and continually enhances the product and improves security measures.
Streamlined Workflow – For the staff putting together the board package, a board portal should include workflow features that provide time and resource savings throughout the process.
Flexibility – It is important for the system to be flexible enough to move at the board's pace – i.e., can you print a board or committee book if needed?
Customer Support – Does the vendor provide 24-7 support, implementation consulting, on-site training, and director training?
Vendor Viability – Is board communication the vendor's primary business and core competency? Are they a public company? If not, are they transparent and can they provide audited financials?
Features – Review the features from the perspective of all users, including board members, executives, and staff members who assemble and approve the board material.
Cost – Cost is obviously a consideration. However, a well thought out and properly implemented board portal should have a positive impact to the bottom line.