As the global pandemic forces companies to adjust their business processes to the new (and ever-evolving) “normal,” boards of directors face a myriad of challenges that they have likely never seen before. As boards come together on Zoom and other videoconferencing software to perform their governance and oversight duties in the time of COVID-19, there has been no shortage of advice from law firms (such as Baker Botts, Wachtell, Morrison & Foerster, Mayer Brown, Skadden, and Sidley Austin, to name just a few), the Big Four accounting firms (PwC, Deloitte, EY, and KPMG), and consulting firms (such as McKinsey). These online pieces are most often published as checklists and “top 10” rankings of urgent issues boards of directors need to consider amid the crisis.
While the framing of each checklist varies—some have more-focused objectives like the process of reopening offices, while others offer more-general considerations—common themes emerge across the inundation of corporate-board-specific guidance:
- Continue to meet regularly. The videoconferencing revolution is underway, and continuing to hold meetings virtually will most likely be a must for companies as they weather the storm. As videoconferencing capabilities become more and more sophisticated (Zoom has gone so far as to publish a how-to guide for hosting secure board meetings on its platform), companies might consider holding meetings of all sizes online, from committee meetings to annual shareholder meetings.
- Update policy. Both as a reminder of what the policies dictate in times of crisis and as an effort to add new provisions in light of this particular crisis, many urge boards to revisit their own policies and procedures. Health and safety, for example, might be one area worth updating and strengthening.
- Work with management. Many advisers acknowledge that working with management through a crisis can be tricky for a board, and often two-pronged approaches are stressed. Augment management capacity, but don’t increase management’s burden. Retain independence, but be prepared to intervene if necessary. In any event, boards might consider increasing communication with management as a first step.
- Emphasis on strategy—short, medium, and long term. Virtually all memos note that boards will want to revisit their strategy not just for now but for after the pandemic as well. Considerations might include reexamining their supply chains, reassessing liquidity, and staying alert to takeovers and activist investors who might take advantage of crisis-borne vulnerabilities.
- Focus on risk management. Overarching all these concerns, boards are having to increase their focus on risk management, whether in the form of new committees or even new attendees at board meetings. Indeed, some have noted the elevation of chief risk officers during the pandemic, as boards increasingly rely on their expertise. And, as Martha Minow explains in “What Boards Want,” boards will likely value experience weathering crises and the various risks involved above all else as they endeavor to add to their ranks.
- Review succession plans. Several point to the importance of revisiting and possible expanding succession plans for key leaders. Bearing in mind the root of the crisis, there is no telling who will become sick and unable to perform in their given capacity. Boards can begin to prepare for those high-impact absences now.
- Ask difficult questions. Echoing the remarks of lawyer-directors in “Lawyer-Director or Director-Lawyer,” asking difficult questions is of paramount importance as a board director. This is certainly no less true during the COVID-19 crisis as boards assess the state of their facilities, the well-being of their employees, and the outlook for business going forward.
Across these various pieces of advice, there is perhaps one unifying theme: despite the suddenness and far-reaching impact of the global crisis, the responsibilities of boards remain the same. “Let’s start with what does not change,” write lawyers from Baker Botts in a recent Corporate Counsel article. They continue:
A director’s role is still to manage the business of the corporation for the benefit of its stakeholders, which can include overseeing management, helping set strategy, and offering expertise. Whether you are an inside director (employee or officer) or an outside director (nonemployee or independent), your fiduciary duties remain the same—to inform yourself of the pertinent facts, act with the requisite care, and work to maximize value of the entire enterprise. The duty of care requires that directors exercise the care of a reasonably prudent person under similar circumstances and in the manner reasonably believed to be in the best interests of the corporation. And the duty of loyalty requires that directors act in good faith and refrain from self-dealing, usurping corporate opportunities, or receiving improper personal benefits in connection with their role as a director.