Board Tech Committees Mean Business

In today's information-driven society, businesses rely heavily on technology and knowledge. Because of that, just as corporate boards have long relied on committees to focus on such key areas as audit and finance, many have come to establish a tech committee as well.

But does the average corporate board member understand today's technology well enough to serve competently on a tech committee? Indeed, should directors even try to provide guidance on technology issues, when the state of the art changes from day to day?

The market certainly suggests that many firms think that directors should and can. An online search reveals that many firms have chartered “science and technology” or similar committees. If firms did not benefit from such committees, then these committees would not exist.

Duties and Variations

The duties of these committees vary widely, however, unlike the clear and limited roles of traditional board committees. Directors are exploring how they should combine a new area of governance, in a rapidly changing field, with traditional board structures, duties and, most important, limited oversight.

Some committees elevate what appears to be managerial-level planning to the board level. Those committees may be necessary to overcome limits on how much other directors know about their companies' technology. Instead of relying on the uncertain technology competence of most directors, particularly in businesses that create and sell technology, the tech committee becomes the “inside” expert advisor to the board.

For these firms, whose tech decisions often must be very specific, perhaps the concept of board-level oversight is itself flawed. Members of these committees must be knowledgeable not only about technology in general, but also about the specific area of the firm's expertise.

For example, technology pioneer Hewlett Packard's committee must “provide understanding, clarification and validation of the fundamental technical basis of our businesses in order to enable the Board of Directors to make informed, strategic business decisions and vote on related matters.” Monsanto's committee should “provide understanding, clarification and validation of the fundamental technical basis of our businesses in order to enable the Board of Directors to make informed, strategic business decisions and vote on related matters.”

In both cases, the full board's “strategic” decisions are informed by the specific, “technical” knowledge of its tech committee members. Tech committee members at these firms truly need advanced knowledge not only of industry technology, but also of their own firm's products and competitors.

Some Not Where You'd Expect Them

It's interesting to note, however, that many leading e-commerce firms don't have such formal tech committees. Perhaps technology has always been so critical to those firms' basic business that all directors must begin with a solid base of tech knowledge.

Also, whether they're on a tech committee or not, directors do not operate a business on a day-to-day basis. For most firms not in cutting-edge businesses, directors' fiduciary duties are instead applied to traditional oversight roles, rather than involvement in the details of individual decisions.

Consider the charges of several committees that indeed have such established oversight roles. Regeneron Pharmaceutical's committee's charge is to “assist the Board of Directors by reviewing and evaluating the Company's research and development programs.” Similarly, Mellon Finan-cial's committee must “formulate and implement operating and strategic plans designed to take full advantage of existing and emerging technology.”

Yet whether their duties are narrow or broad, it's clear that tech committees are not responsible for day-to-day technology tasks, such as installing software or choosing a particular program. The best programmer or systems integrator may not have any qualifications for a board technology-committee seat.

Monitoring the Bigger Picture

Instead, technology committees must monitor broader goals, such as tech-budget allocations, or IT-department needs to support the rollout of business strategy. As tech committee members, they must, therefore, be alert to spot trends in business and society that will affect the firm, and require tech implementation.

Today, such board concerns include assuring that management has paid attention to privacy matters, information and systems security, and regulatory requirements imposed on business-technology applications (particularly in the financial sectors) ' even though these are not purely technology issues. In the same way, tech committee directors should keep the board advised of broader trends and emerging issues, that neither management nor the IT department may be aware of, much less have planned for.

So then, just as persons of wisdom and experience can make excellent directors, without any business or finance background, skilled business executives can serve a firm well on a tech committee, even if their technical competence doesn't extend beyond knowing the IT department's phone extension. After all, board members are appointed for their judgment, not specific skills. Management hires experts for particular needs, and ' except in the case of cutting-edge firms that require expert committee members ' board committees can retain expert advisors if needed.

In fact, perhaps the non-technical members of a tech committee can make the most important contribution to satisfying the board's fiduciary role on board-level tech issues. Committee members without a tech background must make the best business decisions on tech issues, rather than just picking the best tech solution. Tech committee members with a general business background, rather than experience limited to technology, may not accept without question the premises underlying the IT department's decision-making and recommendations.

A technically oriented board member, for instance, may share the same assumptions as the tech executives presenting board proposals. In contrast, a tech committee member without that background may be more willing to challenge whether something that makes sense to the IT department also fits the firm's broader business goals. He or she may also be more willing to question the tech choices that management has presented.

A typical technology committee should not, therefore, concern itself totally with whether management has made the best technology decision – just as no board committee should second-guess its executives' day-to-day business decisions. Instead, a technology committee, to satisfy its fiduciary duties, should worry whether technology decisions fit into the firm's overall business and financial strategy.

Decisions as Strategy Points

More broadly, the technology committee ' and the entire board ' should consider tech decisions as just one part of the firm's entire intellectual-property strategy in our Western knowledge economy. Today, effective use of knowledge in business goes far beyond the firm's narrow technology resources and needs. Instead, knowledge management in the 21st century must include not only patents, trademarks and copyrights, for example, but also policies to develop, protect and exploit the firm's knowledge for profit.

In fact, as a firm must constantly adapt its technology to remain competitive, perhaps the key role for a board tech committee may be questioning whether the executives hired by the board are nimble enough to adjust to this changing environment “on the fly.” The board should also challenge itself to see whether it has prepared the rest of the firm to do the same.

Of course, this broad direction is no different from traditional board management, or from the skills that firms have always demanded from directors. So the question for the future should not be whether typical business directors have the technical competence to serve on a technology committee. Instead, all directors, whether on the tech committee or not, must understand that technology decisions are made not for their own sake, no matter how urgent or compelling a case the IT department may make for a particular capital investment; instead, tech committee members should focus the full board's deliberations on how intellectual property and tech decisions can best serve a firm's overall business strategy ' and what the firm must do to get to that level. That role demands nothing more than the traditional qualifications of any director, rather than knowledge of the latest technology.

In today's information-driven society, businesses rely heavily on technology and knowledge. Because of that, just as corporate boards have long relied on committees to focus on such key areas as audit and finance, many have come to establish a tech committee as well.

But does the average corporate board member understand today's technology well enough to serve competently on a tech committee? Indeed, should directors even try to provide guidance on technology issues, when the state of the art changes from day to day?

The market certainly suggests that many firms think that directors should and can. An online search reveals that many firms have chartered “science and technology” or similar committees. If firms did not benefit from such committees, then these committees would not exist.

Duties and Variations

The duties of these committees vary widely, however, unlike the clear and limited roles of traditional board committees. Directors are exploring how they should combine a new area of governance, in a rapidly changing field, with traditional board structures, duties and, most important, limited oversight.

Some committees elevate what appears to be managerial-level planning to the board level. Those committees may be necessary to overcome limits on how much other directors know about their companies' technology. Instead of relying on the uncertain technology competence of most directors, particularly in businesses that create and sell technology, the tech committee becomes the “inside” expert advisor to the board.

For these firms, whose tech decisions often must be very specific, perhaps the concept of board-level oversight is itself flawed. Members of these committees must be knowledgeable not only about technology in general, but also about the specific area of the firm's expertise.

For example, technology pioneer Hewlett Packard's committee must “provide understanding, clarification and validation of the fundamental technical basis of our businesses in order to enable the Board of Directors to make informed, strategic business decisions and vote on related matters.” Monsanto's committee should “provide understanding, clarification and validation of the fundamental technical basis of our businesses in order to enable the Board of Directors to make informed, strategic business decisions and vote on related matters.”

In both cases, the full board's “strategic” decisions are informed by the specific, “technical” knowledge of its tech committee members. Tech committee members at these firms truly need advanced knowledge not only of industry technology, but also of their own firm's products and competitors.

Some Not Where You'd Expect Them

It's interesting to note, however, that many leading e-commerce firms don't have such formal tech committees. Perhaps technology has always been so critical to those firms' basic business that all directors must begin with a solid base of tech knowledge.

Also, whether they're on a tech committee or not, directors do not operate a business on a day-to-day basis. For most firms not in cutting-edge businesses, directors' fiduciary duties are instead applied to traditional oversight roles, rather than involvement in the details of individual decisions.

Consider the charges of several committees that indeed have such established oversight roles. Regeneron Pharmaceutical's committee's charge is to “assist the Board of Directors by reviewing and evaluating the Company's research and development programs.” Similarly, Mellon Finan-cial's committee must “formulate and implement operating and strategic plans designed to take full advantage of existing and emerging technology.”

Yet whether their duties are narrow or broad, it's clear that tech committees are not responsible for day-to-day technology tasks, such as installing software or choosing a particular program. The best programmer or systems integrator may not have any qualifications for a board technology-committee seat.

Monitoring the Bigger Picture

Instead, technology committees must monitor broader goals, such as tech-budget allocations, or IT-department needs to support the rollout of business strategy. As tech committee members, they must, therefore, be alert to spot trends in business and society that will affect the firm, and require tech implementation.

Today, such board concerns include assuring that management has paid attention to privacy matters, information and systems security, and regulatory requirements imposed on business-technology applications (particularly in the financial sectors) ' even though these are not purely technology issues. In the same way, tech committee directors should keep the board advised of broader trends and emerging issues, that neither management nor the IT department may be aware of, much less have planned for.

So then, just as persons of wisdom and experience can make excellent directors, without any business or finance background, skilled business executives can serve a firm well on a tech committee, even if their technical competence doesn't extend beyond knowing the IT department's phone extension. After all, board members are appointed for their judgment, not specific skills. Management hires experts for particular needs, and ' except in the case of cutting-edge firms that require expert committee members ' board committees can retain expert advisors if needed.

In fact, perhaps the non-technical members of a tech committee can make the most important contribution to satisfying the board's fiduciary role on board-level tech issues. Committee members without a tech background must make the best business decisions on tech issues, rather than just picking the best tech solution. Tech committee members with a general business background, rather than experience limited to technology, may not accept without question the premises underlying the IT department's decision-making and recommendations.

A technically oriented board member, for instance, may share the same assumptions as the tech executives presenting board proposals. In contrast, a tech committee member without that background may be more willing to challenge whether something that makes sense to the IT department also fits the firm's broader business goals. He or she may also be more willing to question the tech choices that management has presented.

A typical technology committee should not, therefore, concern itself totally with whether management has made the best technology decision – just as no board committee should second-guess its executives' day-to-day business decisions. Instead, a technology committee, to satisfy its fiduciary duties, should worry whether technology decisions fit into the firm's overall business and financial strategy.

Decisions as Strategy Points

More broadly, the technology committee ' and the entire board ' should consider tech decisions as just one part of the firm's entire intellectual-property strategy in our Western knowledge economy. Today, effective use of knowledge in business goes far beyond the firm's narrow technology resources and needs. Instead, knowledge management in the 21st century must include not only patents, trademarks and copyrights, for example, but also policies to develop, protect and exploit the firm's knowledge for profit.

In fact, as a firm must constantly adapt its technology to remain competitive, perhaps the key role for a board tech committee may be questioning whether the executives hired by the board are nimble enough to adjust to this changing environment “on the fly.” The board should also challenge itself to see whether it has prepared the rest of the firm to do the same.

Of course, this broad direction is no different from traditional board management, or from the skills that firms have always demanded from directors. So the question for the future should not be whether typical business directors have the technical competence to serve on a technology committee. Instead, all directors, whether on the tech committee or not, must understand that technology decisions are made not for their own sake, no matter how urgent or compelling a case the IT department may make for a particular capital investment; instead, tech committee members should focus the full board's deliberations on how intellectual property and tech decisions can best serve a firm's overall business strategy ' and what the firm must do to get to that level. That role demands nothing more than the traditional qualifications of any director, rather than knowledge of the latest technology.