What Role Should Corporate Directors Play During the Crisis?
Ask a Director Series, Part 3This is the third of a five-part virtual panel series from Diligent Institute: 'Ask a Director: How are Corporate Boards Responding to the COVID-19 Crisis?' Learn more about the series here.
- Eileen Kamerick currently serves on four boards: Associated Banc-Corp. (NYSE), Legg Mason Closed-End Mutual Funds (NYSE), Hochschild Mining, plc (LSE), and AIG Funds. She chairs three audit committees and one corporate governance committee.
- Claudia Fan Munce is currently a Venture Advisor at NEA, as well as a board member at Best Buy, CoreLogic, and Bank of the West/BNP Paribas.
- Jamie Orlikoff is currently the Chairperson of the board for the St. Charles Health System in Bend, Oregon. He is also President of Orlikoff & Associates, Inc., a consulting firm specializing in healthcare governance and leadership, strategy, quality, and organizational development.
- Yiannis Petrides is a board member at Mytilineos S.A., a leading industrial company listed on the Greek stock exchange, and involved in the Energy and Mining sector. He is also a board member at Puig, a privately held company operating in the world of fashion and prestige fragrances, with a brand portfolio including Carolina Herrera, Paco Rabanne, Nina Ricci, and Jean-Paul Gaultier.
We asked our virtual panel what role directors should play to help companies get through (and beyond) the crisis. Here's what they said.Directors occupy a unique vantage point within the company. While management is running the day-to-day crisis response and company operations, directors can focus on the bigger picture, including economic concerns, geo-political issues, public health developments, and where the 'future of work' might be headed. The panelists described how they keep an eye on the long-term strategic view and 'look out' for management while management 'looks out' for everyone else.
Focus on the Longer-Term StrategyForesight certainly seems harder to come by in the middle of a pandemic than at other times. Having directors who can think big picture and provide future-focused insights is particularly valuable to the executives who are 'fighting the alligators in the swamp' right now. Claudia Fan Munce explained how she understands her role and how she tries to fulfill that responsibility:
In general, as a director, I bring information from a higher level and longer-term view. Directors are in a unique position to gain a different perspective from all the analysis [gained] from many great sources ' such as Diligent, Corporate Board Member, NACD, etc. ' all of which actively gather insights relevant to board members and publish them for the board members in their network. [This provides a] higher-level strategic focus to help directors think through the implications of COVID-19 on all aspects of the business, not just near-term, day-to-day operational response. What are the scenarios from a higher level and longer-term strategic impact of this crisis; should we alter or refresh our strategy right now? Do we foresee any resource constraints? How is this impacting our offshoring work? What is the long-term impact of the remote working model? What are the scenarios for when we come out of this? Would it be a long-term or short-term recovery cycle? Managements are so busy with the day to day fluid situation to respond to, the board can focus on this longer-term scenario planning. Even from the director'''s perspective, it can be overwhelming with the amount of information we are receiving, but board members add value in synthesizing it to derive those [insights] that are particularly relevant to the companies we serve and the industry that it is in. Bringing that as a part of both oversight and foresight in the discussion with the CEO and management team complements the daily operational focus that the CEO and the team have right now.
Provide Support for the Management Team ''' Both the Individuals and the RolesOpen communication between the board and the chief executive is critical to effective corporate governance. The chair, in particular, serves as a conduit between the executives and the board and can help ensure the management team has the support it needs to function well. Jamie Orlikoff described how the crisis has sharpened his communication with the board and the CEO.
I want to minimize surprises to both the board and the CEO as much as possible. Overall, I try to anticipate the really difficult decisions that we might have to face and flag them in advance for both the board and the CEO. In order to minimize surprises to the CEO, I informally poll board members before meetings to see if there is a consensus or if there are any questions or concerns ' then I try to give the CEO as much of a heads-up as possible. From a board perspective, I do the reverse: I chat with management, brainstorm issues with them, and discuss if there are any governance angles. This communication process is much more focused in the crisis. This all happened informally before the crisis, where board members would take it on themselves or I would ask questions if I knew someone had an issue. But now that communication is systematic and much more intentional. I think it'''s a good technique to consider when the crisis passes. When we pull back, hopefully there will be some lessons that we learned about governing more effectively in normal times, and I think this is one. It'''s been really useful to do some of that thinking and prework before the meetings.Meanwhile, the COVID-19 crisis brings the added terrible possibility of impacting one or more members of the executive team or board ''' many of whom are in a high-risk category because of advanced age or health conditions ''' with a serious, potentially fatal illness. Orlikoff said his board felt it was important to deal with this painful reality head-on:
We requested a deep interim succession plan from management. That meant asking some very challenging questions. For example, what happens if the CEO, COO, and CFO all fall ill at the same time? Our very strong succession plan did not anticipate a majority of the executive team being sick at the same time, so we asked them to go very deep there.While succession plans are necessary, boards obviously hope never to have to use them. Fan Munce issued a good reminder about another proactive option.
Many discussions that the CEO brings forward to the board are focused on employees, but we need to know how the CEO and the senior leadership are protecting themselves; there is a significant risk to the business continuity if our senior team has to be disrupted. Often it takes the board to insist on that being part of the discussion, as it is not time for the CEO to play hero working outrageous hours and putting less focus on themselves. The board needs to remind them that if they fall ill, it will have a significant impact on a company'''s ability to care for its people.
Leverage the Board'''s Diverse Skill Sets, Connections and PerspectivesA diverse board has a wide range of skill sets and backgrounds, each of which might be critical at different junctures of crisis response. In our interviews, directors emphasized the advantages of having a board representing diverse geographical perspectives ''' particularly as the pandemic spread around the globe, impacting different regions in different ways. Yiannis Petrides explained how boards can harness diversity to be an even more effective asset to management:
We have a very diverse board in terms of capabilities, knowledge, and experience. We tried to ensure that the person on the board with the most experience with each of the items we talked about was taking the lead in terms of providing feedback to management. For example, we have a bank board chair who has a critical perspective on liquidity. I'''m more focused on the marketing and M&A side. I think we'''ve learned over time to do this well, but it'''s becoming even more focused in a crisis. By having the right directors speak to the CEO, the CEO can actually [gain] guidance and ideas from people who know the company and the issues very well and are looking at it from a board perspective.Eileen Kamerick gave another example of a board member with a specific skillset making themselves available to support the executive team'''s efforts.
[Our executive team is] trying to grapple with the fact that people are concerned about going into call centers. So, we'''re asking, is there a way in which we can have peoplework from home and take calls through their computers? But in a regulated industry, we need to maintain compliance controls. One board member had contacts with professionals working at theforefront of this technology, so it was helpful to have that director'''s input and to help get the Head of ITahead of the problem. That'''s a level of detail that probably on a day-to-day basis, I don'''t know that the board would have gotten into, but in the midst of a crisis we were able to step up and help.>>Continue on to Part 4 of 5: What Are the Best Practices for Virtual Board Meetings? >>Return to Part 2 of 5: How Should Management and Board Updates Be Handled During the Crisis? >>Return to Diligent Institute.