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Navigating the pandemic

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May 29, 2020

In May 2020, the National Association of Corporate Directors (NACD) Blog and the Harvard Business Review (HBR) released the following articles on the pandemic.

Articles from the NACD Blog

Private company governance survey reveals COVID-19 accelerated preexisting trends

The 2019–2020 NACD Private Company Governance Survey details responses from 283 private company directors—the same directors who today find themselves guiding companies that are among those hit the hardest by the COVID-19 crisis. The questionnaire was in the field from July to August of 2019. And while that might seem like a lifetime ago, the lessons drawn only take on greater significance as we project toward a new normal. What follows are some the key findings from this survey, and what they could mean for the recovery of private companies.

Redefining enterprise risk in a post-COVID-19 environment

The COVID-19 crisis has outpaced the resiliency mechanisms of most global businesses, bringing two related elements into stark relief: First, the degree of businesses’ hyper-connectivity exceeded the comprehension of most organizations. Second, many firms did not account for the risks inherent in the trade-off between efficiency and resiliency. Together, these two dynamics have revealed a degree of fragility within organizations—and indeed, the overall system—previously thought impossible. Whether or not we face a second wave of the pandemic, systemic threats—such as climate change and cyberattacks—demand new approaches to managing risk at the board level.

Navigating the pandemic: Risk oversight considerations from fortune 500 committee chairs

As companies are still confronting the immediate challenges resulting from the crisis precipitated by COVID-19, boards are beginning to turn their attention to the potential aftershocks of the pandemic to help shape their organizations’ post-crisis strategy amid great uncertainty and continued turbulence. Second- and third-degree risks, such as the credit risks of a customer’s customers or a supplier’s suppliers, are only beginning to emerge, and companies have little time to adapt to this new wave of challenges. At the same time, boards are considering the longer-term implications and opportunities that may result from the pandemic.

Think carefully before rewarding executives who cut their salaries

In past crises—the 2008 financial crisis, for example—we saw many instances of compensation committees “reimbursing” executives for their salary cuts with outsized equity grants. Some also made up for unearned annual bonus plans with equity grants in the name of retention and alignment with shareholders. Grants came at times of depressed stock prices and were usually for a larger number of shares than normal since grants were generally determined according to the then-current stock price of the underlying equity.

Cybersecurity defense and oversight during the COVID-19 crisis

Boards need to consider the ways in which their organizations’ cyber posture is changing as a result of the crisis. Board oversight is critical to ensuring that management is adapting to the evolving cyber-risk landscape as it works to maintain employee safety and continued business operations.

 

Articles from the HBR

How CEOs can lead selflessly through a crisis?

Crises cause us to view leaders as more charismatic and effective than we normally do. This is probably why U.S. presidents are almost universally re-elected in times of war. And research has shown that leaders who self-sacrifice tend to be the most effective.

Should a crisis change your CEO succession plan?

The exception would be if the CEO had shown any reluctance to hand over the mantle of leadership to a successor and might view the crisis as an opportunity to show how indispensable he is and stay in place. If the board does ask the CEO to stay longer than planned, limits on the extension should be negotiated; the terms might include a fixed time frame plus the existence of certain signs of stability, such as positive cash flow and sales forecasts.

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