Board priorities during and after the COVID-19 pandemic

12 November 2020

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Since the onset of the coronavirus pandemic earlier this year and the following lockdowns around the world, companies have faced a myriad of challenges while trying to navigate the crisis in a climate of uncertainty.

Board priorities during and after the COVID-19 pandemic

Since the onset of the coronavirus pandemic earlier this year and the following lockdowns around the world, companies have faced a myriad of challenges while trying to navigate the crisis in a climate of uncertainty. Beyond ‘short-term fire-fighting’, company boards also had and have to look ahead to ensure their businesses’ sustainability in the medium- and long-term while having to draw up different scenarios about a post-pandemic world, characterised by different behaviours, preferences and expectations from customers, employees, investors, governments and other stakeholders[1].

In any crisis, corporate governance has to respond and adapt. While different companies have been affected by COVID-19 differently, they’ve all had to reassess their corporate governance. This article explores corporate governance in the context of the pandemic and how company boards are preparing for doing business in a post-pandemic world.

Jargon Buster

The Diligent Institute (TDI): The TDI provides information and research on global modern governance practices through a global network of over 500,000 board directors and governance professionals.

UNPRI: The UN Principles for Responsible Investing is an organisation propagating principles of responsible investing and working with investors to implement environmental, social and governance (ESG) factors. It has over 2000 participating signatories from over 60 countries representing more than US$80 trillion of assets.

The Investment Association: The Investment Association is a major UK trade body for UK investment managers, with over 250 members managing £7.7 trillion

Board roles during the crisis

COVID-19 affected and continues to affect companies differently depending on their size, geography, market, services and liquidity. But one thing is certain: The pandemic poses risks to nearly all company functions and operations.

Unprecedented in its nature and scope, COVID-19 challenged company boards to “triage” important decisions with new demands arising daily, ranging from health & safety measures to quickly establishing a remote working infrastructure while also dealing with severe supply chain disruptions. Pushed to take quick decisions, boards still needed to ensure they had some room for challenging management in order to make the best decisions rather than just waving through revised policies, budgets and new measures that were put in front of them.

So, how did best emergency-style governance practice look like? A recent virtual panel, organised by the Diligent Institute, offered some useful insights into how company boards adapted during the crisis and what worked particularly well[2]:

Closer collaboration with management

Board directors reported they were more effective with their decision-making after realising that the idea of management versus governance had to be adjusted during the crisis. Governance expanded from solely supervision to include helping manage the business where required and appropriate. Acknowledging that the “blurred lines” between company board and management would become “clear cut lines” again as soon as some normality would return helped putting both sides at ease. 

Real-time communication

Lockdowns not only caused company boards having to substitute face-to-face discussions with virtual meetings and “learn on the job” how to get the best out of this new format, but the global health crisis also meant that boards and management had to communicate with each other considerably more often – weekly updates and “real-time” decision-making whenever pressing issues arose became normality. 

Employees having to cope with being furloughed or forced from one day to another to either adapt to a working-from-home lifestyle or to a severely changed working environment due to safety measures, brought the need for timely and consistent communication into sharp relief: Ideally, board decisions about staff, safety measures and new policies (covering for example working-from-home aspects or payment/leave arrangements in the case of absence due to self-isolation) were communicated immediately after sign-off. Frequent updates to the supply chain, to customers, shareholders and to local communities were equally crucial to avoid company stakeholders being left with uncertainty.

To successfully deal with the pressure of making decisions during a constantly evolving crisis board directors swapped their usual board agenda format with a “Most pressing issues” agenda, which mainly consisted of: health & safety; liquidity & cash management; capital investments, and policies for sign-off.

Balance emergency and long-term decisions

Board directors also reported that keeping their eyes on the bigger picture and the long-term strategy turned out to be another key success factor in mastering the crisis. Despite the need for making emergency-style decisions, taking time to look at external sources such as trading bodies, industry networks or competitors proved to be valuable input for their executives, who often had to fire-fight and think on their feet.

Taking a long-term view and assessing the company’s “fitness for survival” (although there are, of course, companies perfectly placed with their offering to benefit from the new normal), will keep board directors occupied over the next months.

Shareholder and stakeholder dialogue

Looking at shareholder engagement, the unprecedented approach to Annual General Meetings (AGM) this year has presented an unexpected opportunity to rethink the purpose and nature of the AGM. Two thirds of AGMs in the FTSE 100 this year took place behind closed doors[3]. This followed the UK government’s temporary relaxation of legal requirements for AGMs, which allowed companies to suspend shareholders’ and members’ ability to attend in person[4].

Best practice examples showed that opting for a virtual AGM can still do justice to the Code’s principle of increasing shareholder dialogue, if not even help boost shareholder engagement: Marks & Spencer reached 1,500 shareholders with its virtual AGM in July and had over 15,000 views in the days after it went live. Shareholders could ask questions either in advance or live using a website or app[5].

Stakeholder dialogue during COVID-19 wasn’t a one-way street: the UNPRI argued that responsible investors have a duty to help minimise the negative effects of the virus, and set out guidelines on how investors should interact with company boards during the pandemic, further helping to improve dialogue.

The guidelines include:

  • Engaging companies that are failing in their crisis management,
  • Engaging where other harm is being hidden behind, or worsened by, the crisis,
  • Reprioritising engagement on other topics,
  • Publicly supporting an economy-wide response,
  • Participating in virtual AGMs
  • Being receptive to requests for financial support, and
  • Maintaining a long-term focus in investment decision-making[6]

Board focus on post-COVID-19 business changes  

The pandemic has brought many changes for businesses, and some of these will stay. The board’s priority lies in supporting the management team to formulate the most suited business strategies for various post COVID-19 scenarios while taking into account altered preferences and expectations from its diverse stakeholders. So, where can corporate governance help to make a difference?

Reassessing the corporate purpose and value proposition

The pandemic has started to reshape industries and has changed expectations and preferences of corporate stakeholders. With new behaviours becoming the new norm, company boards need to reassess the sustainability of their firm’s value proposition and its purpose. Directors can help their management by engaging with industry networks and experts, and, of course, the stakeholders themselves in order to identify new trends and to understand how business conditions could shift[7].

Reviewing and reshaping supply chains after COVID-19 disruptions

At the start of the pandemic, many businesses found themselves struggling with their supply chains. A shortage of protective equipment, hand sanitiser and empty supermarket shelves were just some of the more conspicuous examples of weaknesses that arose as demand outstripped supply.

Companies differed in their approach to dealing with supply chain disruption. A survey of over 400 executives in the UK revealed that some examples of short-term action to mitigate impact on suppliers included guaranteeing purchase of supply (49%) and providing advance payment to ease pressure (46%)[8]. UK supermarket chain, Morrisons, for example changed the speed of their payments to smaller suppliers to allow immediate payment to some 3,000 small businesses[9].

Going forward, 93% of 60 senior supply-chain executives stated in a McKinsey survey that reshaping their supply chain is a priority. Some are planning to strengthen the resilience of their supply chains by dual-sourcing materials, increasing inventory of critical products and/or looking nearer to home in a bid to shorten supply chains. Furthermore, company boards believe that they need a stronger grasp on supply-chain technology to be able to cope better with a future crisis. Notably, just 11% of respondents expected to overspend to achieve more resilient supply chains showing that budget restraints and better supply chains are not mutually exclusive[10].

Reviewing the business and operating model

During this period, company board best practice entails undertaking a broad strategic review of the business and taking into account the positive outcomes of new initiatives that were launched in crisis mode and might lead the way forward.

While a board needs to ensure effective cash management and financial stability, which in most cases will mean finding ways to cut costs by making the operating model leaner, directors now have a historical chance for change post pandemic: to strengthen their ESG approach rather than to press the reset button.

An important focus will lie on looking how a green business recovery could boost environmental key performance indicators (KPIs) and help find cost savings, short-term and mid-term. In this context, company boards in the UK are also engaging with climate organisations to jointly campaign for a nationwide, government funded green recovery. BT Group, for example, which has the second largest commercial fleet in the UK with around 32,000 vehicles, is collaborating with The Climate Group, calling on the UK government to target 100 per cent electric car and van sales by 2030; to extend grants for electric vehicles and charging points through to at least 2023 and to speed-up the rollout of public charge-points across the country[11].

More flexible working models as well as mental health & wellbeing and staff planning, in particular in keyworker sectors, will be top of the agenda in order to promote the “S” in ESG. PwC’s recent CEO Panel Survey found that indeed very few UK CEOs are contemplating a return to how things were before the pandemic[12]. The vast majority, 86% of respondents, for example believe the shift towards remote collaboration will endure, with 59% quoting the digital transformation of core business operations and processes as one of their top three priorities.

Strengthening social aspects can also include a review of salary structures. With customer facing staff and key workers finding new public appreciation, company boards that have the financial resources to do so may well consider changes to their staff wages and benefits. Supermarket chains were fairly quick to pay bonuses to their shop staff, and UK discount chain Home Bargains not only paid an additional 10% salary for shop staff because of increased workloads but also announced it’ll pay full wages for staff needing to self-isolate[13].

Continuing stakeholder engagement

Whether shareholders, larger investors, customers, supply chain partners or communities, the commitment to communicate as frequently as possible, often on a daily basis, or the willingness to donate for good causes has strengthened the dialogue and the bond between companies and their stakeholders. It’ll be now up to company directors to retain this positive element in the “new normal” by, for example, looking into extending local community initiatives or corporate mentoring programmes for smaller businesses that started during the pandemic.   (link to article The S during the pandemic, which has examples of corporates doing good). 

The “licence for CEOs to change” has been a fairly often-used slogan to describe the unique opportunity company boards are currently facing: The G in ESG can make a significant difference now to help companies and society transition to a sustainable world post pandemic.

Corporate clients who would like to discuss this topic further should contact:

Dr Arthur Krebbers, Head of Sustainable Finance, Corporates or

Varun Sarda, Head of ESG Advisory

Read the further articles in this series: 

There’s no successful E or S without a functioning G in ESG

Corporate governance: staying abreast of environmental and societal expectations

Corporate governance during the pandemic















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