Part 3 of “Ask A Director: What Lessons Have Boards Learned from COVID-19?”Diligent Institute Ask a Director Series - What Pandemic-Era Board Governance Practices and Mindsets Will Be Permanent

Diligent Institute conducted extensive interviews with over two dozen experienced directors from different sectors, geographies, and backgrounds on how modern governance practices and behaviors are changing in response to the pandemic and its impact, which boardroom changes might be permanent, and directors’ most important lessons learned. This segment provides a compilation of director responses to questions about the pandemic and what it means for modern governance going forward, specifically what pandemic-era boardroom adaptations will become permanent. Read the full report here.

What Pandemic-Era Board Governance Practices and Mindsets Will Be Permanent?

It is clear that whatever the new normal will look like, in many ways it will not resemble how businesses operated before the pandemic. COVID-19 and its related effects has opened directors’ eyes to ways they can govern more effectively and efficiently once the pandemic subsides. In every catastrophe, it is the job of directors to learn lessons that will help their companies be better off in the future, and to take positive outcomes as they come and turn them to their company’s advantage.

Panelists:

  • Phyllis Campbell: JPMorgan Chase & Co. (Pacific Northwest), SanMar, US-Japan Council, and Allen Institute
  • Anna Catalano: Willis Towers Watson, Kraton Corporation, HollyFrontier Corporation, Frontdoor, Inc., and Appvion
  • Karen Clarke-Whistler: Enerplus Corporation
  • Doris Honold: Credit Suisse International
  • Donna Wells: Mitek Systems (MITK), Apex Technologies (APXT), Betterment and Happy Money
  • Dawn Zier: Hain Celestial Group (Nasdaq: HAIN) and Spirit Airlines (NYSE: SAVE)

Directors Warmed Up to Virtual Board Meetings

Many directors noted that before the pandemic, they experienced stigmatization of virtual work—especially dialing in remotely to quarterly board meetings. In fact, on many governance scorecards, boards received lower marks for low in-person attendance. However, as the pandemic has forced everyone to virtual communication, directors are realizing some of its benefits for governance, namely efficiency and the opportunity to diversify the boardroom.

“As we emerge from the pandemic, we need to think about how many board meetings actually need to be in person. I see it changing for good. I believe a percentage of our meetings can take place virtually. Board meetings take time and cost money to get people there. From an enterprise perspective, it’s vital for the board to talk to leadership and come to a consensus on how much travel is needed. For internal conversations and meetings, how much sense does it make for people to travel? The pandemic has taught us that we can be much more efficient in the usage of our time.” -Anna Catalano

“The ease of video conferencing, and therefore the increased agility, will be helpful moving forward. Traditional meetings and agendas are normally scheduled as much as a year in advance, but now if there is something that comes up quickly, we can easily meet ad hoc via video conference. So, there is less rigidity in managing an annual calendar. Before the pandemic, if you dialed in virtually instead of attending an in-person meeting, it was frowned upon. Now however, this stigma is disappearing, and will likely continue to disappear after the pandemic ends. I think board members are beginning to realize that a healthy mix of in-person and virtual attendees will not affect the effectiveness of the board. I also think that this in-person and virtual mix will make for more international and diverse boards.” -Doris Honold

Boards Prioritized Flexibility and Adaptability

Directors have seen firsthand that companies that were agile in their pandemic responses have a much better chance of surviving the economic recession and coming out stronger on the other side. As a result, board members are emphasizing the importance of nimbleness and adaptability in decision-making and having diverse perspectives—for individual directors and for board processes as a whole.

“The shift my boards have made to shorter, more informal, and more frequent meetings could be permanent. We’ve seen multiple benefits, similar to those that technology companies achieved when they transitioned from Waterfall to Agile software development. In Waterfall software development, you build out a detailed set of requirements for each feature, and only after 3, 6, or even 18 months do you get to see a finished product. Under Agile software development, the Product, Design, and Engineering teams collaborate in real time to create and ship features quickly, so your solutions are timelier and more relevant, and you learn in-market and faster. These are two very different approaches to the same problem. What we’ve learned from the pandemic, economic crisis, and social justice crisis this year is that a number of boardroom conversations can be more valuable when we take a more Agile and less Waterfall approach to corporate governance. Looking back, it seems odd that we thought every boardroom discussion should be held in the same way: in person and only every three months. Certainly, some board conversations lend themselves to a quarterly cadence, but for those that don’t, we need to adapt.” -Donna Wells

“One of the benefits of the pandemic, in my opinion, was that there were more frequent conversations between management and board directors.  There was less formality, fewer presentations, and more candor and transparency as we all tried to address issues for which there was no playbook. This allowed for more discussion around what really mattered. I’d like to see this focus continue post-pandemic and believe that quarterly meetings should be reframed to allow more time for really discussing and measuring progress rather than business presentations. Boards and management teams are operating at a higher level now than ever before; I don’t want to see us go backwards. Conversations initiated by management have been very productive: management is using the board as strategic advisors, and the board is doing their job around governance. We’ve learned we don’t need to be in person for every single conversation, and I hope we don’t let formality get in the way of valuable, transparent and frequent conversations. In the future, I’d love to see a hybrid model where we get together several times a year, but we also have these more dynamic conversations in between. The new way boards are engaging has actually been more meaningful, more helpful to management, and more rewarding for board members who feel that they are being more constructive while keeping the proper separation between management and oversight.” -Dawn Zier

“We have to stay flexible and not kid ourselves that there will be a static state ever again. This pandemic will end, but there will be another. We need to be nimble, agile … And that’s where flexible and diverse directors are valuable. They will think about contingencies and planning for scenarios that we might not anticipate today. 2020 has shown that we can have four pandemics at once, and they aren’t all health related: political unrest, racial unrest, unrest in cities, natural disasters. This has taught us to expect the unexpected.” -Phyllis Campbell

Increased Focus on Mental Health and Well-being, Human Capital, and Empathy 

Part of what makes COVID-19 a uniquely crippling crisis is that it threatens financial, physical, and emotional well-being at every level of society. Directors have focused on the human aspect of the crisis, and of doing business, like never before.

“The emotional toll this has taken on everyone is unprecedented. You have to pay attention to your own mental health, especially as a director and a leader. Take care of yourself, and make sure your peers are taking care of themselves too. I spend more time being a counselor to management, listening to their anxieties: talking about sleepless nights and how hard it is to get through each day. Listening and supporting is important. The lesson here is to pay attention to the emotional and mental health of your leadership team. Quite often you find that there is something you can help them with if you just ask. We never used to talk about mental health and well-being, and it was unlikely CEOs would ever admit they aren’t doing well. Be the ears and sounding board to your C-suite team and keep in touch with their mental needs.” -Phyllis Campbell

“When you think about enterprise risk management, human capital issues did not dominate the conversation as much as other topics. As a result of the pandemic, we are being forced to really address people issues such as working from home, childcare, home schooling, illness, financial burdens, and mental health. It’s unprecedented and authentic demonstrations of empathy and compassion from leadership and boards have solidified how employees feel about their company.”  -Dawn Zier

“Our risk management is even more focused around making sure our employees and contractors are okay. We’ve been putting more effort into mental health, especially as this has gone on. We have been looking more at the people processes aspect of the business.” -Karen Clarke-Whistler

>>Continue to Part 4 of 7: Boardroom Culture and Onboarding New Directors

>>Return to Part 2: COVID-19 Changing Governance Behaviors and Roles

>>Return to Diligent Institute.