Time to launch a board tech committee?
When cyber attacks disrupted such reputed enterprises as Equifax, Marriott, Best Buy, and Yum! (KFC/TACO Bell parent), and the like, we had proposed constituting a dedicated board cyber security committee. While this was a useful governance approach, the many facets of technology overall have become so crucial to business today that a comprehensive technology committee may be a wiser approach.
A designated, permanent tech committee is not the norm yet, though global numbers are on the rise. At the global S&P 500 level, technology committees have edged ahead of risk committees in popularity – at 12 per cent. However, there are a few caveats – the committee is often blended with other duties such as strategy, innovation or risk. Also, tech committee use is quite sector specific – Healthcare sector enterprises used maximum (21 per cent) and utility companies the least (11 per cent)
Board talent needed for a tech committee is still a work in progress. The open-ended definitions of “technology,” mean that a director who attends a weekend business school session on AI can claim to be an expert, but aim to do better. A study of 40,000 US directors defined “digital savvy” as “understanding, developed through experience and education, of the impact that emerging technologies will have on business. Companies with three or more such “savvy” directors showed 17 per cent higher profit margins, and a 34 per cent higher market cap.
Here are some first-hand tips for board technology committees:
The tech committee must watch for what is coming to the market, and make that a regular part of board conversation. This is a crucial role of the committee – it assures a regular touch point on these issues and contributes to the board's understanding with planned conversations on technology trends, opportunities and risks. The committee can have 3-4 members, meet quarterly, and its charter can spell out a broad range of issues, including cyber risk, digital issues, AI and the internet of things. Start as a work in progress, and you can continually update the charter. Chair duties can involve working closely with management to review materials that come to the committee, and then assure a full readout of minutes to the full board.
The tech committee of an electronics tools company brings a strong bench of tech talent, making committee members industry-savvy, and do deep dives on coming trends. But even less technologyfocused companies should include at least one or two members who bring a breadth of experience in a number of related domains such as risk. How is tech impacting their own businesses, and what insights can they share with the board would be their mandate.
We believe that procedures and paperwork drive board behaviour, and that begins with solid charters for committees. Laying out a well-discussed, regularly reviewed statement of duties, powers, areas of focus (and just as importantly, areas reserved for other committees) is fundamental to the heavy lifting demanded of today's working board committees.
When you are planning a charter, first, note that the titles and ambit of these committees are quite diverse for just being “technology.” Traditional board committees, such as Audit, have a wellestablished mandate and role, and also largely uniform functions. The audit committee of a finance firm, a health care company, or a retail chain will all pretty well handle the same tasks. But the technology used, compliance demands, and strategic issues facing each sector will give their tech committees widely varying concerns and skill needs.
Procter & Gamble's Innovation and Technology Committee is suited to a large consumer products company, and goes beyond just tech oversight to include innovation needs for new products, markets, acquisitions, and company structure. The technology committee of Canadian Solar helps the company stay on the cutting edge of energy technology. Their charter also includes a good eight-point listing of its duties and responsibilities. At Hong Leong Bank in Malaysia, the information and technology committee boasts a very detailed charter of the committee's tech oversight portfolio, especially on cyber resilience. Australian transport firm Sgfleet constituted a board innovation & technology committee with a compact charter that targets the logistics and tech needs of its specific sector.
Tech committees should budget for outside advisors. Given the complexity and the lightning rate of change, the committee can't hope to know everything from within its membership, or even management. Assure resources to tap outside consulting on technology, and also its legal, compliance, privacy and ethical issues.
Given the speed of change in how technology effects business, be sure your committee charter spells out a specific mandate to act as the external eyes and ears of the board on issues like AI, cyber risk and data regulation. More than any other committee, tech committee must watch for what's coming tomorrow.
Given the speed of change in how technology effects business, be sure your committee charter spells out a specific mandate to act as the external eyes and ears of the board on issues like AI, cyber risk and data regulation.