Only dead fish go with the flow
Author: Timen Kraak - Interviewer: Jesse Thiel - Image: Erwin van Amstel
What is the impact of the #corona crisis on the #governance of companies? Jesse Thiel headed a series of interviews with company secretaries and general counsels on this topic to which I was happy to contribute. An English translation of the original Dutch interview can be read below.
JT: This crisis hit us all. Suddenly, everyone had to work from home and we did everything remotely via digital channels. Did you already have good digital solutions to work with?
JV: Certainly. We have always been actively looking for digital solutions at Fagron. I have held presentations for other corporate lawyers about solutions in legal tech. From those conversations and the recent pre-corona crisis experience, two issues arose regarding implementation. One: lawyers usually fall behind with digital solutions. What makes them fall behind, which is point two, is the inability to “sell” those solutions within an organization. They always struggle to demonstrate the business case. At Fagron, we are early adopters, for example, with e-voting and our contract management system. My motto is, “Only dead fish go with the flow.” You have to keep looking for innovation every day.
JT: How has your organization responded to the crisis?
JV: Very good, actually. But were we prepared for this crisis with all our plans? Honestly, no. However, we have always had a plan and a vision, both on a legal and administrative level. We were able to adjust our plans well once the coronavirus came along. The speed with which this is possible depends on the degree of the company’s digitization and the composition of the Supervisory Board (SB) and the management team (MT). Our MT consists of seven nationalities, people who live worldwide, so we were accustomed to virtual meetings. Of course, there are now many more virtual meetings because we have to discuss the situation more often. It is new for everyone. But we were able to switch quickly because we were already digitized, and people were already accustomed to using that technology regularly. We also held digital meetings of the Supervisory Board occasionally - now we are doing that solely digitally. We broadcast our general shareholders meeting live online, which is new. There must be internal support for the digitization of processes. At the general shareholders meeting, we do not need digital voting buttons for the time being as we can physically count those 20 hands of people attending. But what if we grow and physical attendance grows to 200? Then we would need to look at how technology could help us. On the one hand, it is a mindset that must change among lawyers: looking more at how the process can be made more efficient for everyone. On the other hand, the composition of the MT and the SB is also important. In our MT, we have young people who see the benefits of digitization. We also have an SB that is very digital-minded. A supervisory board open to digitization will become very important in the future. Even the most tech-savvy board secretary is a shout in the desert when confronted by a dinosaur-composed SB.
JT: Some companies look purely at digitization in terms of cost savings. However, good digital tools can also ensure that information is available quickly and reliably and that managers can look forward with better information. What about Fagron?
JV: It is not always the simplification or ease of use that is decisive for the introduction of a system. Some processes are also about auditability and information gathering. For example, we once had a lease for a building we didn't need, which would automatically renew for five years. It is useful to have all those contracts in a row to see when they expire. Under IFRS 16 - Financial Reporting Rules - we are required to measure current lease terms and include them in the figures. If that information is not stored centrally, it will take two or three weeks before all those contracts are collected worldwide. Now, the finance department was able to calculate the IFRS 16 impact of those contracts on our figures within half a day.
JT: Control over information is important: having an answer when the question is asked and being able to think ahead. Does the corona crisis have an impact on the way of thinking within your organization? How does this affect the role of the #generalcounsel and #companysecretary?
JV: The job to be done is about to change. We don't suddenly wake up in another world. I continue in my own world, and corona has accelerated the digitization of that world. The attention for digital solutions internally is much greater than last year or the year before. Back then, everyone liked to have digital tools, but now there is a huge relief that they were already there. As a result, not much is changing now. My role becomes more about transparency and education. Implementing a new system involves collaboration. One system is managed by all 50 local business controllers. That means that finance people must be taught legal reflexes. My role is to empower them, transfer knowledge about legal issues, and teach them how to easily perform certain actions themselves - especially the simple steps. More people who have access to systems in a controlled way means more transparency. This is how we distribute legal knowledge. The legal department is no longer the bottleneck that everything has to go through. The strategic work remains with the lawyers, but the simple tasks are spread across the company. This is only possible with digital solutions and by giving people confidence.
JT: Does that also mean that there is a piece of education for your board included?
JV: A few years ago, but not anymore. It is also a kind of flywheel - as soon as these solutions become more visible in the organization, a culture is created where people come up with suggestions themselves. For example, a local business controller came up with a digital solution for direct debits. There is a lack of eagerness to work with these suggestions and solutions among lawyers and board secretaries.
JT: What should we do about it?
JV: Stay eager! Dare to fail, dare to propose a solution and make a plan, but don't stick to it too strongly. The business is changing, which may also require changes to technology. After two years of noting that there are better systems, there is no failure. The market is maturing. It is scary to migrate an entire system full of data and metadata to a new system, but do it! That will also be the work of the company secretary, to convince people of this. For me, the difference in the coming years will be made by integrating different solutions, whereby the information in one system does not have to be entered in another system.
JT: Is the company secretary leading in this? Does this make your role much more strategic?
JV: Absolutely, and personally, I like to do that too. I do not mean that every colleague should do that, but he or she should at least boost it. IT should not be leading in this. Technology for me is a means that I have to facilitate. The company secretary has an advisory function, organizing documentation and information. We must ask ourselves: what information do we need and where is it? Which systems should we link together? The company secretary has that overview of the required information.
JT: Is the board secretary generally involved in this? Or how could we facilitate that?
JV: In recent years, I have discussed and presented how we see things at corporate lawyers' meetings. Such moments of open debate make people think. What I focus on is the mindset: don't be afraid to propose implementation of digital applications. People think that this is due to IT, but the board secretary also plays an important role in this. I also have discussions with IT about the management of those systems. Sometimes they completely shut down certain functions in a system because there have been two instances of potential risk. Then it turns out that this application is used about 6,000 times a year. Why would we reduce all functions 99% of the time due to a few risk cases? The lawyer has added value for the company because he or she says, "We will accept that risk because the upside of using all functions is many times greater than limiting the risk if we close everything." That is not a classic legal thinking process, but that function is becoming increasingly important.
JT: How do you keep up?
JV: Lots of reading, mainly professional literature. I also spend a lot of evenings in social media groups, especially internationally, and I listen to a lot of legal tech podcasts. More legal counsel should do that; scour those social media! And if you come across any solutions there, don't hesitate to try them. There is so much to be found, it is unimaginable. Lawyers, especially in Belgium, continue to hold rather corny ideas, while so much information and inspiration is available online. That is underrepresented in the communities in the Benelux; the exchange of best practices and discussing and evaluating systems. We can be more active and visible online and on social media. Stimulate the discussion and dare to come out and share experiences.
JT: Fagron is listed in Belgium, but the head office is in Rotterdam. Are there differences of opinion?
JV: Absolutely. Belgians are usually more conservative than the Dutch. I am lucky to have come to the Netherlands seven years ago, which has also made me more direct. The Netherlands is undoubtedly ahead of Belgian board secretaries. Look at e-voting. At Fagron, we were the first in Belgium, while the Netherlands had been doing this for 3 or 4 years. In general, there is a difference of several years.
JT: Would it be interesting to do an exchange there? Both countries can learn from each other well.
JV: Yes, and that must transcend the legal basis. The argument against this exchange is the difference in regulations. But high level is no difference there. The needs of companies are the same. Don't be blind to the details of regulations; think in terms of possibilities. For example, we kept our paper process alive during votes so that the supervisor could not say anything about it. In addition, we have set up a digital solution and said that is also allowed. There is more of that pragmatic, solution-oriented mindset in the Netherlands than in Belgium.
Johan Verlinden is Global Legal Affairs Director and Company Secretary at Fagron (https://fagron.com/en), a global leader in personalizing medicine, working closely together with pharmacists, prescribers and universities worldwide in optimizing and innovating personalized pharmaceutical care.
Author (of the original Dutch interview): Timen Kraak is editing coordinator and editor at Management Scope (https://managementscope.nl/online/johan-verlinden-digitale-oplossingen-aandragen).
Interviewer: Jesse Thiel is Country Manager Benelux at Diligent Corporation (https://diligent.com/), supporting organizations towards a safe and digital boardroom.
Photography: Erwin van Amstel is an independent photographer in Amsterdam (https://erwinvanamstel.com/)