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Brexit uncertainty: The need for board level transparency and accountability

The results of the recent EU referendum have caused huge economic and political uncertainty, in the UK and across the rest of Europe. Even with a new UK Prime Minister now in place, there does not seem to be a clear plan as to what the best course of action is.

Some businesses, including Vodafone and easyJet, have publicly raised the prospect of moving their headquarters out of the UK, while the vote for Brexit has also prompted credit card firm, Visa, to float the possibility of relocating hundreds of British jobs to the continent.

However, moving countries is no small undertaking. What should organisations bear in mind when considering this, and what role will strong governance play?

How big will a business exodus be…and where will it go?

A February 2016 poll of British and German companies operating in the UK by the Bertelsmann Foundation, showed that 29 per cent said they would either reduce capacities in the UK or relocate altogether if the UK voted for Brexit. Businesses in the technology sector were particularly open to relocating, with 41 per cent say they would consider either decreasing capacity or relocating.

Now the referendum has happened, many firms will remain in ‘wait and see’ mode for a while yet. But if some firms have publicly discussed the possibility of moving from a post-Brexit UK, this is most likely just the tip of the iceberg. Many more companies will be considering doing so in the privacy of their boardrooms.

The three places that keep coming up as possible new locations, are Frankfurt, Luxembourg, and Dublin. The latter retains a number of cultural similarities (as well as language) to the UK and has the potential to act as a new gateway to Europe, an important path for many American companies.

But Luxembourg and Frankfurt will have a firm eye on London’s position as a financial services hub. The UK will try to make the tax environment as attractive as possible to try and keep finance houses in the country, but Felix Hufeld, the head of Germany's financial regulator Bafin, has stated he could not see London hosting the HQ of the ‘eurozone's most important’ stock exchange after Brexit.

This would not only cast doubt on Deutsche Börse’s planned merger with the London Stock Exchange, but overall suggests that financial services in particular, could be vulnerable in the post-Brexit UK.

One company, different jurisdictions

But any organisation moving their HQ will undoubtedly face a number of challenges, and it will require strong governance at the very highest level. Not only do compliance requirements and jurisdictions vary from country to country, but such a complex process needs absolute transparency at board level. Employees, shareholders, customers, and other stakeholders will all want to know why certain decisions have been made and what the rationale was behind any relocation.

All this means that boards have to be more open and transparent, and this means that boards must move into the digital age with far more enthusiasm than they have done to this point. We recently conducted a survey with company secretaries at UK firms, and it was revealed that 52 per cent are using digital tools for their company board packs – a positive development, but paper is not yet dead and many organisations are still using it.

Not only is this a major waste of time and resource – the research revealed that an average of 6,200 sheets were printed each year per company, just for board packs – but it also is bad practice when it comes to governance.

Time for boards to embrace digital

It’s not just inefficiency and bad governance that result from the use of paper-based board packs. The use of online board portals to replace paper or PDF based board packs for board meetings will also keep data more secure, and will mean board meetings are much more transparent.

It also makes for a significantly more productive use of board members’ time, who now have any information they need -- about say, the different jurisdictions in two countries -- and can easily access it before, during and after a meeting via their personal device. Running an organisation in one continent but with two jurisdictions is a major challenge. Tough decisions need to be made and the decision makers will need the information to make a choice.

People also expect businesses to be open and transparent in their operations and in what goes on at board level. This is even more true in the turbulent post-referendum economic and politic climate. With organisations potentially looking at relocating and making major decisions about their future, board level transparency is more important than ever, and to improve this means it is time for boards to fully embrace digital.

Alister Esam is CEO of eShare

Image source: Shutterstock/Sashkin

Alister Esam
Alister Esam, CEO, eShare - established in 2004, eShare's online board portal BoardPacks is used by hundreds of organisations over the world to improve corporate governance and make meetings smarter.