November 8, 2020
By Mary Lee Schneider
At the last (in-person) NACD Summit in 2019, I overheard one fellow attendee ask another what her biggest takeaway was so far from the conference. “Being on a board is a real job—it’s hard work,” she answered.
I laughed, well aware of the (false) perception that board “work” means, swooping in four times a year for meetings and dinners with the occasional conference call in-between.
How times (and hopefully, perceptions) have changed. COVID-19 has not only changed our world forever but has ushered in a new era of governance and board engagement. The pandemic has upended every aspect of how boards and companies engage—from the cadence of meetings to new agenda topics to the platforms for engagement. This is particularly true for family-owned businesses who had to address not only the impact of the pandemic on their employees and their companies but also on their longer-term view of ownership.
In the early days of the pandemic, the boards I serve on moved to weekly one-hour update calls. The devastating impact the pandemic was having on our employees, their families, and our communities was first and foremost in these discussions.
The balance sheet was up next, as cash was king and the key to business survival. CEOs learned that it was important to keep your friends close but your bankers closer. A strong balance sheet and access to capital meant the difference between business survival or failure.
Painful discussions were needed to take immediate and tough actions, including business shut-downs, across-the-board salary cuts, furloughs, or permanent layoffs. The CARES Act, in particular the Paycheck Protection Program (PPP), created confusion in terms of both the process of applying for and the criteria applied to loan repayment or forgiveness. If PPP money was applied for and approved, then a debate ensued as to whether to keep the money or give it back, given ever-changing regulations.
By mid-July, the weekly calls had reverted to bi-weekly calls. By mid-September, the calls were beginning to become monthly. Board and committee meetings continued, albeit virtually.
I’m not sure we’re ever going back to the communication cadence of the past. In-person meetings will always be critical as strengthening relationships and experiencing culture are not best suited for a virtual-only environment. That said, in the future, board work might be best described as “noses in, fingers out, and frequent Zoom update calls in between meetings.”
While risk management is a core responsibility of the board, the pandemic took this duty to a whole new level. CEOs became part-time epidemiologists, economists, and public policy experts—all while doing their full-time jobs. Directors had to become more knowledgeable on broad topics related to public health, workplace safety, and geopolitical risk as the virus surfaced, retreated, and resurfaced around the globe.
For family businesses, there were even more foundational conversations going on. Honest and, at times, uncomfortable discussions had to be had regarding expectations of ownership. For some, uncertainty with respect to the duration and long-term impact of the pandemic accelerated many conversations, including:
Since there is no “pandemic playbook,” the board and management had to create one. Board members were more open to and management more accepting of advice and counsel. Director experience from previous crises was particularly helpful, regardless of industry, as insight came from unexpected places.
Organizations such as NACD, the Private Directors Association, and all of the major accounting and board advisory firms jumped in to offer virtual sessions for directors to connect and share real-time perspectives on everything from compensation practices during times of crisis to preparing for a post-COVID world. This reinforced the message that directors need to continually invest in their education and network of advisors to provide relevant advice during times of crisis.
Overnight, boards had to get comfortable if not expert with multiple virtual meeting platforms, whether it be Zoom, Microsoft Teams, Cisco WebEx, Skype, or any number of other online meeting platforms. IT troubleshooting became a new core skill set, as did learning new protocols like mastering the mute button (particularly when not talking), followed famously by learning when to turn your camera on or off and the need to raise your (virtual) hand to ask a question. Trivial skills, but new to many.
A New Era of Governance and Engagement
The pandemic forced management and their boards to forge fundamentally new relationships. Going forward, the cadence of communication will be more frequent, the topics discussed broader, and the platforms for engagement a mix of in-person and virtual. For family-owned companies, the crisis also accelerated conversations regarding ownership expectations, time horizons, and diversification strategies—business and otherwise. Going forward, these conversations will occur on a more regular basis, not just in times of crisis.
Mary Lee Schneider is a director of Larry H. Miller Group of Cos., Active International, Old World Industries, and Board of Trustees, Penn State University. She is also an NACD Directorship Certified director.