The Dutch Corporate Governance Code is currently being revised (at the end of 2022). A draft is available. Stakeholders have responded to this in recent months. Additional suggestions could be made. The concept of long-term value creation is a central theme. There is plenty of discussion about the meaning of this concept. New to the Code is the explicit inclusion of environmental and social governance (ESG) in the context of long-term value creation. Digitalization is also part of this.
The Corporate Governance Codes in St. Maarten and in Aruba are currently also undergoing a thorough review and update (what about Curacao?). In these new Caribbean Codes, long-term value creation together with digitalization also occupy a clear place. The same applies to the upcoming Corporate Governance Code FISP of the CBCS. Thus, ESG and digitization have become a prominent topic on the agenda of Board of Supervisory Directors.
Digitization is the cause of many misconceptions in boardrooms. The first misconception is that digitizing has to do with automating. Very little. Automation is about the improvement of internal business processes. That is what the IT Department is all about. Digitizing is about strategy. A misconception shared by quite a few executive directors and supervisory directors is that the building blocks for digitization can also be made available by the IT Department. Well, no. Ideas are always welcome, of course, but strategy falls under the responsibility of the Board of Executive Directors under the supervision of the Board of Supervisory Directors. The IT Department is comparable to a canteen. The coffee attendant ensures that there is good coffee, and that the coffee is made on time. The fundamental choices that precede this pertain to the responsibility of the management. How much coffee should be available how often, do employees drink coffee together or alone. Nespresso or Nescafe? Digitalization, unlike coffee, has much more impact on both employees and clients. Digitalization is, essentially, nothing more than a form of change management.
This also requires an understanding of the values that form the basis or guiding principle of digitization. Is the reference framework economic? Should digitization primarily lead to cost savings? What about the information security? How much information should be made available to what stakeholders? What about the safeguarding of fundamental rights, e.g. privacy? Who gets access and when? What about the HRM aspects? This also ranges from specific decisions to strategic decisions. It is about relationships, it is about communication, and in a larger context, it is about anticipating the needs of the client in the best way possible. These are all extremely important questions that need to be discussed in the context of digitalization.
Digitization is not a process that can be resolved at a meeting on Wednesday afternoon. It is a process in which everyone in the organization is continuously and always playing a role. Placing digitization on the agenda does, therefore, not imply that it can be launched at a certain moment and that it has an end point. In a diligent manner, you must try to determine how one wants to behave as an organization and together in a continuous digitization process, at what pace, and from what perspective.
The Board of Executive Directors is responsible for making this awareness explicit and must submit a comprehensive proposal for the management of the digitalization of the organization. This kind of proposal can be short-term, e.g. for the coming year. It must also include the guiding principles for the medium and long term. In doing so, you cannot escape having to make fundamental choices in each of the areas mentioned above.
If this kind of memorandum is not available then the Board of Supervisory Directors should inquire after it. If the Board of Executive Directors then replies that they shall request the IT Department for a report, it is immediately clear that the Board of Executive Directors is clueless.
