Year 2020 seen a very complex new reality of Covid-19 in corporate governance, considering various decision-makingchallenges in governance models guiding board members and business leaders under extraordinary situations … With such trails and learnings, board’s ability to deliberate a thorough, efficient and thoughtful converging conclusion around multiple key issues will be a critical consideration of 2021 and ensuing post-Covid era.
In the new light, several well-run boards are gearing for self-evaluation with combination of director surveys and personal interviews to assess the functioning and effectiveness of the board, its committees and related individual members. Such preparations for the next round of self-evaluation will be important to assess capabilities and readiness to govern in 2021 the wake of Covid-19.
Covid period in 2020 had tougher Boardroom decision constraints ranging over a series of considerations! An example of returning cash through dividend to shareholders … at a time when employee lay-offs were eminent, potential future opportunities almost lost, following or going against calls for dividend cuts, adding further to it – company’scash position and strategic plans. A decision, typically only a few minutes of board discussionbecame a deliberation for an hour or even longer). As an outcome, some boards decided to maintain the dividend, few decided to suspend or reduce. Irrespective of the final decisive instances, the process for reaching it was not straightforward.
This simple example of dividend payout decision by the boards, during Covid-19is a manifestation of increasingly complex set of pressures intensifying on corporate decision makers, complicating board decision-making, challenging model of governance in guiding boards and business leaders.
In pandemic situation, society started depending deeply on well-functioning companies to meet its basic needs like food, shelter, communication … while companies at times instead of maximizing its returns to shareholders,consideredadditional factors in creating values over a longer period. A distant vision of this natureis anadaptation to changes as well as challenges in the scope of accountability of a good governance.
Covid-19 as an articulation of inflected adaptations in corporate governance has challenged cores of governance model in multiple ways to many boards. The pandemic situation forced some companies struggle as either their customers thinned or disappeared, majority workforce reduced to bare minimalessential employees, disruptions in supply chain, insufficient capital in funding regular operational activities and many more unprecedented sudden scenarios of disruptions. Considering the gravity of such unique crisis,management adapted to practice and update the board on situationsof various stakeholder groups, declaring health&safety of employees as utmost importance, retaining customers as top priority for them.
Lessons from Covid-19 point towards more active role of boards in monitoring company relationships with their core stakeholders by asking management to continue the “Covid-born” practices of periodic reporting to the board on the status of each group, establishingnew goals and a reporting process allowing the board to track the company performance more systematically over a period. Boards are aligning to take-up active roles, ensuring various stakeholders handled consistentlykeeping the health of the company,purpose and strategy intact for longer term.
Covid-19 though started as a public health crisis, later evolved globally into a financial and economic crisis manifesting either collapsing demand overnightorflooding orders in some other areas – a change in social and living needs in pandemic situation. New ways of working evolved in a matter of days, stock prices fell abruptly with unprecedented volatility, many companies stepped up to fill the gap even as they struggled with their own problems. Meetings and updates had varied agenda where directors reviewed management plans to steerthe company through the crisis, simultaneously combating aid as relief effort.Expectations from institutional investors, governmentsand publicstarted growing from companies to pay more attention to public problems, take a more active role to address them… Boards too aligned to oversee the business and society interface for corporate responsibility, sustainability, societal engagement, corporate citizenship, ESG...
The year 2021 and emerging post-Covid period likely to see transformations in board functioning, as boards initiate their annual self-assessment process, reviewing their capabilities and closely reviewing readiness in each of these areas.It is now the testing time for Board’s readiness as the Post-Covid Era is ticking-in …
In this new era, boards will try to assess their capabilities and readiness in some important areas fitting whatever format and desired structure, say in terms of statements that directors may respond to express their agreement or disagreement on a numeric scale. Key questions and statements considered in the form of survey or interviews will open-up newer dimension to adaptation with trials of learning from dreadful Covid19 experiences of 2020...
