Corporate Boards: Learning on Oversight & Practises Amidst Covid-19 Pandemic
National Association for Corporate Directors (NACD), USA conducted a survey named “American Board Practice and Oversight Report” to understand the measures taken by the American Board of Directors in tackling the Global COVID-19 Crisis and the ways forward.
This study is helpful to figure out common Board practices adopted around the major economies to face unpredictable risks and to make adjustments in existing risk management models for smoother revival while following emerging trends.
In times of the coronavirus pandemic, a certain desk or corner of the house has turned into an office, all the work and meetings have moved to virtual platforms. Many directors reported that a full board meeting should be virtual as everyone can attend via electronic medium.For a face-to-face meeting, it is often difficult to pick a time and place that suits everyone. It is much easier for directors to connect in the virtual meeting from wherever and with whomsoever in the world. If someone has limited time, they may still be able to check-in for at least a few minutes.
The impact of the Covid-19 pandemic and how to emerge from this lockdown had pre-occupied boards of directors. Board met more frequently to satisfy the constant corporate governance criteria, which are reflected in the number of managers reporting an excessive burden. But despite the drawbacks, 74% of directors claim that it has been an overwhelming shift and that without overburdening management, they can rule effectively in this environment.
The role of the director has been made more demanding during Covid-19. As boards have received more regular management updates and have shorter, more frequent meetings to deal with a multitude of problems that have arisen. The survey indicates that most directors spend more time on the job. Although the frequency and intensity of meetings are likely to decline somewhat as the crisis subsides, the new normal demands that boards will eventually require directors to devote more time to their role than has customarily been the case.
To respond to the COVID’19 catastrophe, directors have to sweep changes to discuss new norms to work in this competitive world. This global crisis has increased their commitment at least by more than 50% for the first few months. The new environment is characterized by an increasingly complex set of pressures and demands from various stakeholder groups, heightened expectations for societal engagement and corporate citizenship, and radical uncertainty about the future. Therefore, these factors are complicating the decision of boards.
The Top three challenges faced by directors during COVID breakdown were to ensure online board meetings as effective as in-person meetings, recalibrating strategy, and management of the support management team to work efficiently. As boards must assess their readiness to meet the new demands and develop a plan to address any gaps, they will have to work more closely with management on strategy, tracking a richer set of performance measures, overseeing an expanded menu of risks, rethinking compensation policies, engaging in more thoughtful deliberation, reviewing board composition andall these activities do take time.
According to the Global Network of Directors Institutes survey, 59% of the board of directors were focused on recalibrating strategies to new markets depicting how uncertain the work was during COVID.Since the onset of Covid-19, corporate boards had to face a string of difficult decisions in corporate governance. Their focuswas on (Environment, Social & Governance) ESG as pandemic has brought home the tight connection between business and society, and underscored the threat posed by risks stemming from large-scale societal problems. Boards have also faced increased pressure to incorporate stakeholder perspectives and voices, especially those of employees, into their oversight and decision processes. They also faced challenges to show that the company is performing well for all its stakeholders.
Diversity, Equity and Inclusion policy have to be adopted by the management to curb negative implications of Covid’19. There is a need of the hour for management to have an open conversation about mental health as the mounting stress of balancing work and personal life responsibilities can lead to a mental breakdown. Directors or management must initiate productive and healthy discussions, forming employee resource groups, training on harassment and discrimination and creating channels where employees feel safe speaking about racial issues. They must also be able to red flag mental health concerns in people and help them cope with them. The onus is on the management to boost morale and encourage mind-positive virtual workplaces. As per the National Association for Corporate Directors (NACD) report on Diversity, Equity & Inclusion more than two third of the firms have been taking steps for the improvement of the DE& I parameters in their respective firms.
After the crises are over, the ‘new normal’ for the organization will look quite different in terms of the policy, strategy, and ways of working. There will be an opportunity for certain organizations to learn from the current crisis and to emerge from it as a stronger, more resilient organization. Therefore, in the flurry of COVID-19-inspired activity, it is important that boards not lose sight of their central functions as governing bodies of the companies they serve.
