Corporate Governance During Covid-19: Five Things Better Boards Are Doing Now
15 April 2020 -
Lean in and provide support for each other to do the right thing imperfectly. The blame game can come later. But don't smother the management with help. Plan for exit as well as survival. And redefine risks around consequences not causes.
At the latest Better Managers Briefing I was delighted to speak with CMI president, Lloyds of London chair and Santander vice-chair Bruce Carnegie-Brown and Patrick Dunne, governance expert, chair of several charities and author of the award-winning book Boards. Here are the highlights:
1. THINK CAREFULLY ABOUT ALL YOUR STAKEHOLDERS AND GIVE EMPLOYEES GREATER PRIORITY
In the stakeholder wheel of customers, shareholders, employees, community and regulators, the balance has changed. As Bruce says: “...most commonly, businesses strive to put customers first. And if you do the right thing by customers, you end up doing the right thing by shareholders… What I think has happened in this crisis is that employees have risen right to the top of the list”.
The focus is not only on how to protect employees through the crisis but to enable them to continue working at home. Sometimes this has a detrimental impact on the customer’s experience – for example, bank branches and call centres are closed with fewer people on hand to answer calls, yet enquiries are sky-high.
So as well as keeping employees safe and abiding by government directives, you have to go out of your way to help customers through the tough times. It’s a difficult balance to get right. Banks extending overdrafts, offering mortgage holidays, and insurers refunding car premiums due to lack of driving in lockdown are all examples, as are manufacturers jumping in to make up shortages of PPE.
Equally where firms have not put employees first and sought to protect them there has been a reputational backlash – for example, keeping stores open without providing PPE for frontline staff.
Both Bruce and Patrick believe that such examples will remain in people’s minds when the crisis is over.
2. TIP THE OVERSIGHT/SUPPORT BALANCE TOWARDS SUPPORT TO DO THE RIGHT THING - IMPERFECTLY
In the balance between oversight and support, most boards have shifted towards the latter in the past few weeks. But that doesn't make the decisions any less difficult. You want to lean in and be supportive but, says Patrick, equally “you don’t want to smother the management with help.”
Doing the right thing is difficult when you cannot satisfy all the elements of the stakeholder wheel. Patrick mentions how a charity he chairs that works in African slums has taken the difficult decision not to send in people to help because this would mean endangering inhabitants and workers. So the organisation has had to pause.
Similarly, cutting executive salaries and bonuses is certainly the right thing to do, but cutting dividends could inflict financial pain on pensioners and the elderly.
3. HAVE A THREE STEP PLAN:
2. Connect and communicate with stakeholders
3. Plan the exit strategy
One important way boards can help management is to help them to broaden their focus beyond survival – especially at times when, as Bruce puts it, “the urgent is crowding out the important.”
In the early days of a crisis, he says, survival is critical and that means protecting cash flow and developing scenarios about the severity of the crisis and how long it will last. The second phase is about keeping the connections going with employees, customers and other stakeholders.
The third phase, says Bruce, is where we need to be putting more resources – and that’s the exit. What are the scenarios for recovery and long-term planning? “How are we going to recapitalise our economy at a government, company and individual level as we come through this?” he asks. “More people need to give thought to those issues.”
Patrick adds that boards can ensure time is devoted to each phase. He encourages boards to involve different people in the decision-making process for each of those three questions to help inform the decisions.
As Bruce says: “I’ve met with fellow board members trying to galvanise thinking processes around how we exit this crisis in due course. It’s not easy.”
4. WORK AT SPEED HOLISTICALLY WITH GOVERNMENT, REGULATORS, COMPETITORS AND OTHERS TO OPERATIONALISE SUPPORT
A vital aspect of this crisis is that it has highlighted the interdependence between business, government, regulators and others, and how vital it is they work together and think about things holistically. Bruce highlights the government’s unprecedented offers of support but notes that until the banks and insurance companies chip in to operationalise that support it will be found wanting.
He also highlights the vital role of regulators. Some are loosening regulatory requirements, for example on financial services firms to enable them to operationalise and deal with the urgent needs of businesses and individuals. But he admits to thinking: “If they can drop these in the time of urgency, why can’t we do that in the normal course of business?”
Patrick agrees that this is a great opportunity for business and government to work more closely together than they have done previously and to bring about lasting change.
5. RISK WILL BECOME ABOUT THE CONSEQUENCES NOT THE CAUSE
Both Patrick and Bruce believe that new ways of working will emerge from this crisis. One of the biggest changes will be the way in which boards approach risk and risk management. As Patrick puts it: “We’ll think more about planning for consequences than planning for causes.” Most risk registers have events in them, but he believes it's not the event that needs planning for as much as the consequences. What happens when schools, factories, shops and call centres close will get more attention in future.
New productivity and wellbeing initiatives will come out of this crisis, Bruce believes. People have learned to spend more time remote working and using technology to do things differently. But he cautions: “we’ve got to be careful that we don't throw out the good things when we are trying to change how we operate.”
Patrick believes this crisis will see a new generation of star talent emerge – especially at middle manager level, and gain greater visibility. “You look at the way really great managers have stepped in, made things happen and deliver results. That’s been great for the customer and the organisation.”
You can watch the recorded webinar with Bruce and Patrick here.
Why not head over to our Leading Through Uncertainty hub for more articles relating to management practices during the Covid-19 crisis?