GNDI Survey Highlights How COVID-19 Will Reshape Corporate Governance
Boards worldwide were satisfied with their own performance and that of their organizations through the COVID-19 pandemic, a recent report shows. In August, NACD launched a survey on behalf of the Global Network of Director Institutes (GNDI) of close to 2,000 directors and other business executives on a number of topics related to how boards were handling the health and economic crises.
GNDI is an organization comprising 22 director institutes around the globe, which represent over 150,000 members. Every two years, GNDI, led by a different one of its member organizations, conducts a survey and publishes a report on the takeaways. This year, NACD had the honor of being that member institute. Other key findings found in the latest paper, Global Network of Director Institutes 2020-2021 Survey Report, include that virtual meetings are here to stay and the way that boards identify risk will fundamentally change post-pandemic.
Virtual Meetings are Here to Stay
Despite initial setbacks, a majority of the directors from around the globe note that they were able to govern effectively online and that their boards intend to use the virtual toolkits available to them for both full-board and committee meetings going forward. The data tell us that the beginning stages of shifting to remote work were tough for directors, however. Thirty-nine percent of directors list “ensuring that virtual board meetings were as effective as in-person meetings” as one of their top challenges in responding to the COVID-19 crisis. When asked about the biggest challenges facing directors in the virtual setting, 68 percent of respondents list “losing nonverbal communication between directors” and 35 percent list “technological problems disrupting the meeting.”
Despite these challenges, directors still envision a future with virtual board meetings. Forty-six percent of directors say their full boards will meet virtually at least two out of five times in the future, with 57 percent saying the same for committee meetings. Why the enthusiasm? The second biggest challenge directors faced in the virtual setting in 2020 was technological problems, but innovation happening now and to come in the virtual communication space will bring with it more ease of use while the obvious advantages of virtual meetings (lack of travel, increased frequency of meetings with shorter durations, etc.) will remain. These trends were seen evenly across the globe. South American directors, though, expect to have a much higher frequency of virtual board and committee meetings going forward than the global average. In the United States, only 39 percent of directors expect at least 40 percent of full-board meetings to be virtual in the future.
Boards Report Satisfaction with Performance
Throughout the duration of the crisis, boards have been satisfied with not just their own performance, but also the performance of their organizations and their ability to get out of management’s way. Indeed, 89 percent of survey respondents claim that they were able to govern effectively in the new environment. Seventy-two percent are satisfied with their organizations’ existing crisis response plans and 93 percent note “staff commitment” as a strength in the face of the COVID-19 crisis.
Moreover, 79 percent respond that they feel they did not overburden management during the pandemic, despite an increased frequency of meetings; 87 percent of US-based directors say the same. What could this mean for the board-management relationship? Perhaps directors are not cognizant of their own demands of management—or perhaps directors and board leaders have truly refined and altered what they ask of management. Every board should reflect on this point to ensure that they have an effective board-management dynamic for the current state of business as well as the next crisis.
Risk Management Will Never Be the Same
“How could we not see this coming?” has no doubt been a question asked in leadership circles around the globe. Only 14 percent of survey respondents say that they had pandemic or mobility-restriction risk on their dashboards prior to the outbreak of COVID-19. While only 47 percent of directors report that their boards have codified lessons learned from this crisis to improve their playbooks for the next crisis, 60 percent of respondents note that “incorporating a new set of broader risks into scenario planning” will have the most long-term impact as a result of the pandemic. Seventy percent of respondents, meanwhile, say that COVID-19 will increase how often their boards incorporate the views of outside experts in scenario planning. These points, and others contained within the report, hint at big changes to come in risk management.
Additional takeaways from US-based director responses to the global GNDI survey are available in American Board Practices and Oversight Report. Questions that ask how boards have reacted to recent calls for a corporate reckoning over systemic racism and racial injustice are included.
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Andrew Lepczyk is a research analyst at NACD.