Strengthening the Board’s Role in Strategy During COVID-19 (June 20, 2020)
Strengthening the Board's Role in Strategy During COVID-19 (June 20, 2020)
While strategy is a key fiduciary duty of the board, more than 60 percent of directors say they want to improve their oversight of both strategy execution and development, according to NACD's 2019-2020 Public Company Governance Survey. As the COVID-19 pandemic and other crises arise, the board has an imperative to help management rethink the company's strategy.
Moreover, in a recent NACD poll, focused on business issues resulting from COVID-19, 60 percent of respondents ranked shaping an effective post-crisis strategy as one of the top governance challenges their board will face over the next three months. To help NACD members analyze and adjust their strategy based on the new operating reality, NACD produced Governance Challenges 2020 in collaboration with Heidrick & Struggles, the KPMG Board Leadership Center, Marsh & McLennan Cos., Pearl Meyer, and Sidley Austin. This resource includes tools to help boards oversee the following issues:
- Strategy oversight and time management: Making time for strategy in an era of proliferating board responsibilities. The traditional oversight mandate of the board has been augmented by responsibilities in new, critical areas, including reputation management, digital transformation, and cybersecurity. Directors can use this tool to improve strategic oversight through board meeting process, composition, and culture.
- The lead director's role in facilitating the board's engagement in strategy. The lead director or the non-executive chair plays an essential role in driving the board's engagement in strategy. This tool outlines eight areas for board leaders to focus on, along with sample questions to consider, as they facilitate boardroom conversations on strategy.
- Facing uncertainty. While survival is a first-order existential priority, to thrive is the aspirational opportunity, and thus this is also a time to re-evaluate strategy. This tool features 25 strategy and crisis-related questions directors can use to improve board agility and use that agility to adapt the company's long-term strategy.
- Align compensation plan design with strategy. When executive compensation is thoughtfully designed and implemented, it functions as a strategic tool that helps the board to communicate priorities and shape a course of action. Directors can use this tool to identify how to incentivize executives to meet or exceed business goals successfully.
- Thinking like an activist. One of the key responsibilities that boards have is approving corporate strategy and monitoring management's execution of strategic plans. This tool helps directors evaluate the company's strategy to assess potential strategic vulnerabilities that might attract activist shareholders.
The directors' perspective should allow them to see the forest, or the long term, through the trees of a short-term crisis to ensure that management is thoroughly weighing each strategic decision against the short and long term. As companies adapt to the new normal, the board's role in strategy remains a key fiduciary duty that may require greater-than-normal ongoing assessment.
NACD Resources: Cybersecurity and Privacy Forum on June 23 gives directors an opportunity to learn and connect with fellow directors on the increased cyber risks of COVID-19 and their impact on strategy. NACD's Strategy Oversight Resource Center provides myriad resources on the board's role in strategy. The NACD BoardTalk blog Global Disruption: What's Now, What's Next, What's Beyond discusses directors views on the long-term impact of the pandemic on globalization, a key strategic component.