You may not recall, but 30 years ago, back in 1990-91, Canada was in a recession and corporate Canada was stressed with massive public and private debt, high inflation, an oil crisis, devalued currency and pressure for wage reform.
Former Bank of Canada Governor Gordon Thiessen painted this picture in his final speech before retiring in 2001 while addressing the snail’s pace at which corporate Canada adopted new technologies.
“Canada’s focus on its economic challenges during the 1990-91 recession distracted firms from seeing the effects of technological changes such as declining communications costs, product design and innovation, cost control and productivity improvements, along with the increased susceptibility to international competition. They postponed the adjustments needed to respond to a changing world economy,” he said.
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Social unrest and climate crisis may take the place of the 90’s economic challenges, but those challenges can distract us from paying heed to the profound changes being brought about by today’s accelerating innovation and that’s just as worrisome.
Pre-COVID, the most often cited problem keeping directors and executives up at night was the constant pace of change being driven by technology acceleration. During the pandemic, executives have had to redirect their focus to business continuity and recovery, employee and customer safety, lost revenue, increased debt, and the general societal strain caused by over 100 million COVID-19 infections and more than 2 million deaths worldwide.
Nevertheless, leaders shouldn’t lose sight of the pre-pandemic concerns and must prepare for the newly evolving world – one which will include far more technology advances, innovation and competition, not less.
“Those who do not remember history are bound to repeat it.” – George Santayana
Going beyond IT
With the breadth of responsibilities tied to the board of directors, it’s not surprising that having sufficient diversity proves difficult, especially given the magnitude of the issues and velocity of change that organizations are facing today.
Technology has become so foundational to organizational existence. Beyond IT, we have to consider communications and operations infrastructure, enriched customer engagement, enhanced business analytics, automated product design and development, improved safety and even workforce selection and development. Technology advances can’t be relegated to an occasional update to the board.
Despite the undisputed heroics that technology has delivered through the pandemic, and the increasing innovation being developed and deployed in every industry, we’re not seeing the permanent addition of this critical skill set to the boards of directors in Canada’s top companies. Only seven per cent of directors bring technology expertise to the board table, and 50 per cent of the companies have no digital experienced directors at all (based on November 2020 data). By comparison in 2019 research by MIT CISR, 24 per cent of U.S. boards were considered digitally savvy.
The scarcity of digital directors in the boardroom creates a gap in providing the necessary oversight that is a fundamental responsibility of the board. A director of a major organization recently affirmed this – while the CISO was presenting an update on a cybersecurity event the majority of the board became “distracted.”
This digitally-experienced director had to ask for attention to be paid to the important information being conveyed. In this case, it was a good news story, but what if it wasn’t? Boards not conversant on their digital strategy and technology-driven impacts to their organization are at great risk, and with no digital directors to encourage and guide these discussions, it’s unlikely they will be given the due attention.
Today, the board has turned toward new pressing matters – environmental, social and corporate governance (ESG), diversity and inclusion (D&I) and stakeholder activism. Of course these are important issues that warrant the addition of these skills to the board, but not to the exclusion of technology experience. Board composition needs to better reflect the changing environment organizations are operating in.
“One of the most critical factors in board effectiveness is ensuring that, collectively, the individuals around the table bring a broad portfolio of skills and experience relevant to the keyboard responsibilities.” – CPA Canada, Elizabeth Watson, QC
As the following chart illustrates Canada’s top corporate boards are disproportionately weighted to finance and legal, reflecting traditional governance roles and responsibilities. The world has fundamentally and profoundly changed and board composition must reflect that.
Source: State of Canada’s Top Board’s Digital Savviness, Mary Whittle, Strategic Innovation Matters, December 2020. Click to enlarge.
Governance reform is needed such that skills are more diversified, experience from the incessantly changing technological and innovation sectors are added, ideally including younger, “born digital” members.
Important new regulatory recommendations on governance do not include technology
Although there has been considerable advocacy for increasing digital literacy on boards we’re not seeing it materialize in the appointment of technology-experienced directors.
Key influencers in governance spheres recognize change needs to happen. However, two important bodies of work being introduced by the most experienced and influential governance experts in Canada, have very little or no mention of technology, nor do the contributing advisors bring digital experience to the discussion.
In February 2021, Peter Dey and Sarah Kaplan released “360° Governance, Where are the Directors in a World in Crisis,” an update to Dey’s seminal work in 1994 Where were the Directors?, often referred to as “The Dey Report” that forever changed the rules of corporate governance in Canada and was influential the world over. While the august contributors to this important, timely update – and there are over 40 – bring a wealth of legal, financial, business management and academic expertise to this report and its recommendations, none of the contributors hail from the technology sector.
In October 2020, Chartthefuture.ca was formed, a joint initiative of the TMX and the Institute of Corporate Directors aiming to chart a new Future of Corporate Governance in Canada. The 13 governance experts architecting this bring the necessary finance, legal and business expertise to the undertaking, but again, no technology expertise.
The Canadian technology sector has brilliant, thought-leading executives who can serve as valuable contributors to a board’s work. Let’s improve the representation of technology experienced leaders on Canada’s corporate boards, elsewise we could look back at this time to see corporate Canada again became “distracted, and postponed the adjustments needed to respond to a changing world economy….and was [unduly] susceptible to international competition”. We must not allow this.
“Every time history repeats itself, the price goes up.” – Ronald Wright.
I have co-authored a report for IDC Perspectives, with Alizabeth Calder, IDC Adjunct Researcher, and author of Duty of Care, that provides recommendations on what technology leaders can do to help advance this important work. Canadian Corporate Boards need Technology Leader’s Insight. It is available at www.strategic-matters.com. Enjoy!