India Inc logs into future governance

She came to the office earlier than usual; Coleen, her secretary (an artificial intelligence program), reminded her of the engagements for the day, including a board meeting. She was aware how this meeting would be a crucial ‘litmus' test of her leadership (her performance was an agenda item). She quickly reviewed the meeting's presentation deck — kept deliberately brief, as directors had real-time access to company information, thanks to cloud computing and visual dashboards — and logged into the meeting. Telepresence technology made it easy for the geographically-displaced board members to meet frequently.

Above is a creative representation of a CEO beginning her workday sometime in the future. This is broadly how future organisations would look like

Technology would be the dominant contributor to changes in the corporate world. Organisations of the future will be lean, and they will not hesitate to constantly re-model themselves to adapt to the changing environment. They would favour a relationship-based model — such as alliances, joint venture partnerships, minority participation plans and marketing agreements — over a centralised model.

If current developments are any indication, regulations will become more prescriptive and the competitive landscape more crowded. In such an environment, the role of company boards and their management would probably become more onerous. At the board level, we can expect to see:

Increased independence and empowerment of independent directors — helped by the effort of most companies to either split the roles of the Chairman and CEO, or appoint a Lead Independent Director. They will be more proactive in seeking information other than that supplied by the management by reaching out to middle management, junior employees and business partners.

Greater diversity in board composition: The ‘relationship-based' model of future companies and their global ambitions will most likely foster diversity in terms of the nationality and experience of directors. Also, with gender diversity high on the agenda of companies and regulators, it might be fair to assume that a significant proportion of directors in an average company boardroom would be women.

Increased involvement of shareholders in director appointments: Regulators in countries such as the US and India are trying to introduce reforms in the process of director nomination and voting to facilitate greater involvement of minority shareholders.

Therefore, future organisations will see minority shareholders more involved in director appointments.

Rationalisation of executive compensation: In recent times, the hot-button issue of ‘executive compensation' has been witnessing considerable shareholder activism. We can expect future organisations to design compensation packages that are simpler in structure, with active inputs from shareholder, and directly aligned to the company's performance.

With a larger, globally-dispersed and diversified shareholder base, shareholder engagement becomes all the more crucial. Here, we can expect to see:

Less complex and more informative annual reports: While XBRL implementation will increase the comparability of data across organisations, we can expect future organisations to focus more on simplifying at least the narrative part of the annual report for the benefit of lay shareholders. We can also expect them to focus more on the non-financial and sustainability aspects of the company's performance.

Increased use of Web 2.0 technologies that are participatory in nature — such as syndication of site content, social networking sites, blogs and Webcasts/ podcasts — to enhance the reach of company disclosures.

In effect, the elements central to effective governance at future companies include a collaborative approach to decision making; effective use of technology to overcome information asymmetry; and greater involvement of minority shareholders.

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