COVID-19: Emerging Board Governance Priorities

By Mandy Wright and Reaa Chadha


COVID-19 Crisis Oversight Disruptive Risk Online Article

As the COVID-19 crisis continues to escalate—on Wednesday the World Health Organization declared the virus a global pandemic with more than 118,000 cases reported worldwide and 4,292 deaths, and the 11-year bull market came to an end—companies and boards are working overtime to confront a series of cascading risks that run the gamut from employee health to the viability and continuity of their businesses.

Amid indications that both personal and economic well-being are likely to worsen, local and state officials across the US continue to discourage or ban large gatherings and encourage “social distancing.”

The pandemic is raising unprecedented new questions regarding labor and employment, privacy, communications both internally and externally and what information can be shared, the safety and viability of the supply chain, and, yes, corporate governance.

Priority one amid such uncertainty remains overseeing how the workforce is being protected and staying productive. In recent days, NACD has identified at least six new action areas for directors involving both the operations of the board and its governance of the enterprise. 

Editor’s note: The content of this article reflects NACD’s guidance as of March 13, 2020, and builds on NACD’s previous COVID-19 article posted on March 3, 2020. NACD will continue to update guidance as the crisis evolves.

Hold board and shareholder meetings remotely.

Look at what it takes to shift from planned physical meetings to remote meetings and how to do them effectively—and as often as needed. This includes both board and annual shareholder meetings. Broadridge Financial Solutions, for one, offers standing guidance on virtual shareholder meeting best practices in a 2018 paper. Following such guidance will allow for as little disruption as possible to the proxy season while keeping shareholders’ health in mind and preventing further spread of the virus.

Some examples of companies adopting this virtual approach include Banco Santander, which held an extraordinary meeting this week to determine that it will hold a virtual annual general shareholder’s meeting on April 3. Starbucks Corp. also amended its annual shareholder meeting location to “virtual meeting format.” Their meeting will take place on March 18.

Direct the audit committee to consider financial reporting and disclosure implications.

How do you report out on virtual board meetings? Does your company fit within the US Securities and Exchange Commission’s (SEC) guidelines on delayed reporting due to being impacted by the virus? How will this all effect proxy season?

Public companies will need to consider all the areas of an SEC filing where they may need to address current and future material effects of the virus, such as in the management discussion and analysis, risk factors, or financial statement footnotes, according to a Deloitte article published in The Wall Street Journal. This article further notes that beyond being comprehensive in company filings, the completion of the audit may be hindered by travel restrictions and “the inability to prepare or provide information necessary for the audit related to operations in affected areas.”

Revisit executive pay plans.

Toward the beginning of the crisis in February, NACD published a blog written by Compensation Advisory Partners that addresses how compensation committees might approach setting pay plans now and as COVID-19 rages on. Some of the main areas of concern regarding executive pay in the current environment include potentially resetting annual goals for the CEO, reconsidering the CEO’s bonus plan, and even reassessing how appropriate CEO pay set before the crisis still is amid market and business financial losses and general workforce uncertainty. Some airlines, which, according to the International Air Transport Association, this year could globally see losses in passenger revenue between $63 billion and $113 billion thanks to the virus, have outright cut their CEO pay.

United Airlines’ president and CEO, for example, will both as of now give up their base pay through June 30, and Southwest Airlines’ CEO will take a 10 percent cut in pay. Forbes reports that these moves are good for both the companies’ finances and reputation, but that further consideration and possibly justification of executives’ pay packages—and perhaps even those of board members—is still needed in this time of crisis to reassure stakeholders that boards are doing their utmost for the good of their companies.

As a board, be as active as you can be, from wherever you are.

Work closely with management to support the hard work they are doing right now. Provide expertise where needed and when sought. Look back at former crises to inform action for the current one. How is the board being kept informed to satisfy its fiduciary duties, both as a matter of oversight and in the context of its own actions? Are there emergency succession plans in place in the event that the CEO or other key executives become ill? Boards should assess the need and desire of the business and stakeholders for increased board involvement in their company’s corporate response to the COVID-19 outbreak, reflecting on what worked in past crises and to what extent management is prepared to handle the situation, with or without coaching.

As challenging as this may be, directors must resist the urge to manage at this stage and remain vigilant in providing oversight, guidance, and assurance to their management team.

Plan for resiliency and build trust.

Concerns are being raised about what kinds of benefits should be extended to workers both during and after the crisis. Who will bear the cost if workers are forced to quarantine at home for two weeks or more? Given these unprecedented circumstances, is the company’s sick leave policy fair? Does it need to be reevaluated? The coronavirus outbreak presents an opportunity for companies to demonstrate their commitment to corporate purpose and their stakeholders. This entails that the board continue to be a steward of long-term value, emphasizing a work culture built on trust and care—especially as working conditions change.

Darden Restaurants, whose holdings include Olive Garden and LongHorn Steakhouse, announced it would offer all of its workers up to 40 hours of sick leave annually. “As we continue to make investments in our employees, we strengthen our greatest competitive edge—because when our team members win, our guests win,” said Gene Lee, Darden’s president and CEO, in announcing the new benefit. has also announced that it will offer up to two weeks of paid sick leave to workers—including part-timers in the company’s warehouses—diagnosed with the virus or held in quarantine. And Amazon, Microsoft Corp., and others plan to pay hourly support staff through the crisis as their staffs are being advised to work from home and regardless of whether or not support staff are called in to work. Caring for all stakeholders—especially employees in a public health crisis—will help to build trust and commitment in the workforce as uncertain times continue, potentially having a positive impact on talent retention and attraction post-crisis.

Communicate, communicate, communicate.

Delta Airlines and companies across industries have been communicating to customers directly through emails, texts, and websites. Delta Airlines has set up a webpage dedicated to the coronavirus that seeks to assure employees and customers it is doing all that it can to protect them. Many airlines have further waived cancellation and rebooking fees. Professional services firms, including the Big 4; consultants such as Accenture, McKinsey & Co., and Marsh & McLennan Cos.; and law firms including Sidley Austin have parts of their websites devoted to the COVID-19 crisis. And NACD has established a COVID-19 resource center to keep boards abreast of the latest evolutions and business and governance implications.

In a time of such uncertainty and fear, business leaders who are proactive in their public response and internal communications may help to reassure their stakeholders—and keep their businesses rolling as a result.

Mandy Wright is senior editor of Directorship magazine.

Reaa Chadha
Reaa Chadha is a former senior research analyst at NACD.