New Guide Helps Boards Adapt to Evolving COVID-19 Crisis (July 18, 2020)

New Guide Helps Boards Adapt to Evolving COVID-19 Crisis (July 18, 2020)

Board Lens

New Guide Helps Boards Adapt to Evolving COVID-19 Crisis (July 18, 2020)

Corporate boards serve a critical role in a crisis and are expected to effectively oversee management’s response, communicate with stakeholders, and think critically about strategy in the post-crisis landscape. To help boards confidently govern through the COVID-19 crisis and prepare for the slow recovery period, NACD has created a new resource, Adaptive Governance During COVID-19: A Practical Guide. This publication shows directors how they can apply the principles of adaptive governance in five key areas: ensuring effective board-management engagement, maintaining board effectiveness, executive pay and performance, the board’s role in stakeholder engagement, and identifying risks and opportunities in the short and long term.

The COVID-19 pandemic requires boards to adapt their governance practices amid fluctuating risks, new or changed information, and an unpredictable business environment. According to the Washington Post’s COVID-19 tracker, roughly 60,000 new cases have been reported each day in the United States, stunting the process of rebooting the economy. Compounding matters is a lack of consumer interest to reengage with businesses as they did before the crisis. According to a recent Gallup poll, only 27 percent of respondents feel comfortable resuming normal activities while 29 percent say they will wait until the day when no new cases are reported in their state. Financial resilience and safe environments for employees and customers will remain key considerations in business decision-making for the foreseeable future.

Effective leadership in this environment will demand that boards apply adaptive governance in five critical areas: board-management engagement and how the board can best be a strategic asset; board effectiveness; evaluating executive pay in relation to performance; the board's role in stakeholder communications; and evaluating the long-term risks and opportunities created by the crisis. As the ability for businesses to reopen under current conditions remains highly uncertain, and by focusing on these areas, boards can improve their oversight of complex and fast-moving risks. 

Key Questions Directors Should Ask

  • Has management updated its risk-management dashboard with forward-looking metrics and guidance instead of focusing on what has already happened?
  • Is management continuously updating its COVID-19 response strategy in light of new information?
  • What are investor expectations for how the board should oversee risks and crises? Does management keep the board up to date on challenges or concerns from shareholders?
  • How can directors be certain management has the necessary tools and support from the board to adapt and emerge from the pandemic?
  • How has the crisis and management’s response affected CEO pay and its alignment with performance?
  • What lessons can we apply from our experiences in the early weeks of the crisis to the current state of the pandemic?
  • How can we think about board refreshment strategically to better prepare the board for the next crisis?