director perspectives the coronavirus...

CORPORATE BOARD MEMBER

Institute

Institute

DIRECTOR PERSPECTIVESTHE CORONAVIRUS CRISIS

Although it is far too early to measure the full impact COVID-19 will have on companies over the long term, it is imperative for boards to immediately assess both the strategic risks this pandemic poses to their company, as well as the potential impact a prolonged fight will have on their business.

As an independent and unbiased resource for public company directors, Corporate Board Member—and our Corporate Board Member Institute—are dedicated to providing the guidance, insights and best practices needed to successfully navigate the most pressing issues confronting boardrooms today.

To this end, as the world now faces an unparalleled challenge, we wanted to share with our valued director community some thoughts from seasoned board members about navigating the coronavirus crisis.

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CORPORATE BOARD MEMBER I DIRECTOR PERSPECTIVES: THE CORONAVIRUS CRISIS 1

Leigh TownesExecutive DirectorCorporate Board Member [email protected]

2 CORPORATE BOARD MEMBER I DIRECTOR PERSPECTIVES: THE CORONAVIRUS CRISIS

PANEL

Maggie WilderotterBest known for leading troubled Frontier Communications’ journey from a regional player with $750 million in revenues to a $10 billion national broadband, voice and video powerhouse, Wilderotter has served on dozens of public, private and nonprofit boards. She is currently a director at Costco Wholesale, Hewlett Packard Enterprise, DocuSign, Juno Therapeutics and Lyft.

Michael O’NeillThe retired chairman of Citigroup, O’Neill stewarded the bank through the wake of the financial crisis and Great Recession, one of the darkest times in its history. Citigroup ultimately ended up doubling shareholder value during O’Neill’s tenure. After retiring from Citi’s board in January 2019, his peer directors named him Corporate Board Member’s Director of the Year.

Gaurdie E. Banister, Jr.The former president and CEO of Aera Energy LLC, Banister currently serves on the board of Tyson Foods, is the lead director at Russell Reynolds and is a member of the board of trustees at American University. He has served on the boards of Marathon Oil and Bristow Group. He is founder and CEO of Different Points of View, a firm that provides advisory services in the areas of leadership and safety.

Claudia Fan MunceA venture advisor at New Enterprise Associates, one of Silicon Valley’s largest and most active venture funds, Fan Munce is also on the boards of Bank of the West/BNP Paribas and Best Buy. She joined NEA in 2016 after 30 years at IBM, where she founded the company’s venture capital group and helped the company devise strategy.

Betsy AtkinsBetsy Atkins, founder of Baja Corporation, is a three-time CEO and serial entrepreneur who currently serves on the boards of Wynn Resorts, SL Green and Volvo. She is a columnist and regular contributor to Corporate Board Member.

Ilene GordonThe retired chairman and chief executive officer of Ingredion Incorporated, Gordon currently serves on the boards of Lockheed Martin and International Paper. She is also vice chair of The Conference Board and a member of The MIT Corporation, the Massachusetts Institute of Technology’s board of trustees.

Collectively, our panel of public company directors has nearly three centuries of executive leadership and board experience. What follows are their perspectives on how board members can be most effective during this unprecedented crisis. Their comments, edited for length and clarity, do not necessarily reflect the opinions of the boards on which they serve.

Here are three essential themes that emerged from the discussions:

Focus on Employees and Customers—Not the Market. In conversation after conversation, our panel continued to raise the idea that this was a time for management to focus, as much as is possible, on ensuring the well-being of employees and customers first, shareholders second. “There’s not a hell of a lot one can do, in the short term, to deal with the panic [in the markets],” said Michael O’Neill, the retired chairman of Citigroup and CBM’s 2019 Director of the Year. “So let’s deal with employees. Let’s deal with customers.”

Help Management, Don’t Overwhelm Management. Communication, our panel agreed, is crucial, but CEOs are likely overloaded with information right now. Best practice is to act as a sounding board, don’t demand constant updates—and don’t send a slew of 10-page reports their way in an effort to help. “The best practice that I’ve actually seen from companies is to form a very dedicated group within the board to avoid this ‘too many cooks in the kitchen’ syndrome that happens when you have a very fluid situation,” says Claudia Fan Munce, venture adviser at New Enterprise Associates and board member at Best Buy and Bank of the West/BNP Paribas. “This risk committee becomes the firm’s first line, not necessarily engaging the full board.”

Stay Strategic. The board’s role in a crisis is maintain an analytical, long-term perspective for the company, panelists agreed. Help with the present moment where you can, but do not get swept away by it—you are not part of the management team. Gaurdie E. Banister, now a director at Tyson Foods, recalls his time as an energy company CEO when oil prices dropped 70 percent during the financial crisis: “As the crisis ebbed and the economy began to recover, we were in a much better position to capitalize on the upside than others because of our board’s attention to the long term. Importantly, we had the support of our employees and suppliers because we had gone through the crisis together with them, rather than making hasty cuts.”

THE 3 KEY TAKEAWAYS


Chief executives can have a tough time with ambiguity, says Wilderotter. Directors can help by serving as advisers, talking through issues that arise. “They need safe havens to do that to make the right decisions and to make good decisions.”

Where to FocusFirst and foremost, it’s important for all companies to really look at their liquidity. Do they have enough cash on hand? Do they have access to capital if they need it? Can they cut back or curtail on certain expenses till we kind of work through all this?

It’s a hunker-down time, wrong or indifferent for every company— being able to weather the storm and to think about it as a 6 to 12-month window in a worst-case scenario, so we have some contingency plans. Companies must also look at what happens when we get to the other side. Are there opportunities as well as risks associated with this?

The other part, of course, is making sure we keep people safe, employees safe, our leadership safe because a lot of times the leadership says, “We’ll do this for the employees but not for ourselves.”

‘Let Them Be Able to Talk Through Things’Maggie Wilderotter, Director, Costco, HPE, DocuSign, Lyft

I think boards have to have a responsibility to also curtail what the CEO and the senior leaders do to make sure that they take the right precautions, whether that’s working at home or whether it’s closing down certain offices for a specific period of time.

It’s really important for the board to understand what management is doing—and for the board to also encourage management to take the right precautions for themselves.

Contingency PlanningMost of the companies that I’m affiliated with have now encouraged their employees to work at home and to figure out if there is certain manpower that has to be at the office, can we do that in shifts so you don’t have big crowds—just essential folks.

There are some businesses that can’t close. For example, the Costco warehouse business isn’t going to close down. So how do we keep people safe when they are in the facilities and they are around other people?

And then, to also make sure that we’re giving the right advice on a daily basis. We’ve got parents that have kids who are at home now and


schools are closed, how do you deal with that?

One example is the protocol for conference calls. A lot of folks are not used to doing large conference call groups. I had one yesterday with one of my boards and it was important to just remind people to say “what page are you on?” with a presentation. Let’s have some level of protocol of how people participate.

There’s also the issue that the services people use for conference calls are being overloaded. So, where do we get capacity in order to operate our businesses? I know a couple of companies are thinking about how to do that. How do we partner with the different groups to make sure we have some exclusive access where we need it?

The other thing is just the basics of staying home. Don’t come to the office if you’re sick. Even if it’s not coronavirus, just don’t come. Don’t affect other people’s immune systems. That’s the most important thing. So there’s the people issue. It’s protecting the company and making sure the company can withstand for a 6 to 12-month window.

Then: how do you communicate with your customers and your suppliers? I have a small business, just my own business. My husband and I did a contingency plan over the weekend, last weekend, to make sure that we have enough to support our workers even if we’re shutting down for several months. Just put that money aside. I know that there’s no federal program right now for giving people paid leave. But for a lot of businesses, we’re going to have to try to do that to get through a bad period of time.

I’ve talked to every one of my CEOs in the last two to three days because they’re all asking, “Is this


overblown? Are we thinking about it the right way?”

CEOs don’t like ambiguous situations. They like to control and they like to figure out, “Well, what are we gonna do?” And so, as a board member, it’s important to be an adviser, a level head. You’re not there in the business every day, but let them be able to talk through things because they need safe havens to do that to make the right decisions and to make good decisions.

Role of CommitteesSomething that I recommended to a couple of my boards is to do a conference call once a week with just the committee leaders and the chair-man of the board. I chair DocuSign, for example. So, the head of comp is focused on what are we doing on the employee side, working with the CHROs and the CEOs. And the head of audit is working on the risk side with the CFOs and the liquidity

issues, etc. And then you’ve got nom/gov working on “what are we doing from a governance perspective and communications perspective?” It’s a little SWAT team just to make sure everybody stays aligned.

For a number of our companies in tech, we get a lot of our supply from Asia to make equipment and to basically produce assets. And we’ve had a lot of discussions about [shareholder] guidance, and what kind of guidance do we give or not

give at this point based upon really not knowing, but to communicate with our shareholders to let them know what we’re thinking, to keep them updated as well as we learn. I think we’re trying to be more trans-parent than you are typically in business-as-usual [mode], as things change. So I do think that that’s one of the governance things that I’ve talked about with some of the nom/gov leaders too.

Thoughtful planning is better than knee-jerk reactions. We should pro-cess information and actually apply that information to our specific situa-tion in our business. It’s important for boards to lean in during this period of time with their CEOs, not lean back. And as we hear and learn things, to share that information and to stay in touch and to be more pro-active communicating with each oth-er. That’s important. Not to overreact, but to be a little bit more planful than sometimes anxiety drives you to be.

‘For Once, I’m Going to Put Shareholders Last’Michael O’Neill, Retired Chairman, Citigroup

IT’S IMPORTANT FOR BOARDS TO LEAN IN

DURING THIS PERIOD OF TIME WITH THEIR CEOS,

NOT LEAN BACK.

“

As chairman of Citigroup, he guided the bank through one of the darkest times in its history. In this current crisis, he says, “step one is to listen carefully to the guidance that professionals are giving you.”

‘For Once, I’m Going to Put Shareholders Last’Since the financial crisis, banks have done a very good job of coming to grips with potential threats like terrorist attacks and natural disasters, etc. This crisis has some of the same

scent, but it is really quite different. Frankly, this is more complicated, be-cause situations like those, they tend to be isolated.

This is a pandemic. Knowing what to do in situations like this is tough, particularly given that business people don’t have expertise in this area. I’m not sure anybody does at this stage, but certainly, business leaders don’t. So, step one would be to listen carefully to the guidance that professionals are giving you, obviously.

Then you have to focus on the different constituencies that are affected. And for once, I’m going to put shareholders last, because there’s not a hell of a lot one can do, in the short term, to deal with the panic [in the markets.]


BE INFORMED BUT NOT INTRUSIVE. DON’T GET IN THE WAY, BUT MAKE

SURE, AT A HIGH LEVEL, THAT YOU UNDER-STAND WHAT’S GOING ON AND THAT YOU’RE KEPT

AWARE OF THINGS.”

“So let’s deal with employees. Let’s

deal with customers. And let’s deal with the fact that banks are critical to the maintenance of stability. If you look at Italy, they’re keeping three things open: They’re keeping pharma-cies open. They’re keeping grocery stores open. They’re keeping banks open. So, in the case of banks, it’s pretty important that you stay open, but also that you do so safeguarding, to the extent you can, the health of both your clients and your employees.

So, what do you do? Well it’s com-mittee work, as usual. Audit works on the business side. What’s really going on here? Why is there little liquidity in the treasury markets, etc.? And then, the personnel committee has got a lot of work to do, to make sure that the management is doing the right thing to protect, to the extent possi-ble, its employees and its clients. With the business resumption plan, the operating people need to be involved.

It’s a full-court press without a roadmap. There’s a hell of a lot of things to do, a lot for management to do, particularly, but also for the board.

Working with the CEOA couple of things. One, they’re going to be incredibly busy, so you don’t want to dominate their time. On the other hand, you want to know, in some detail, what it is they’re up to. So I would have regular meetings to

get progress reports—just staying on the case, making sure that the approach that’s being taken is some-thing that the board is comfortable with. The management is obviously closer [to the situation] than the board is, but you get a sense for the competence of these people pretty quickly. And, hopefully, you have someone in the job who you’ve got a lot of confidence in. But this is a really tough one.

Acting as a source of support would be the most important thing. People are going to get some things wrong, obviously, but, in a large context, I think the response will probably be as good as it can be.

And so, it’s more supportive than assessing, at this point. Inevitably you’re in an assessing mode. But there’s going to be a lot of work. A place like Citi operates in 100 countries. Not every situation is the same. It’s just an enormous amount of work to do. And, by the way, when the market drops 20 percent, there are financial implications as well. So it’s not like you can forget about business for a day or two. There are all sorts of things going on in the en-vironment that you need to be aware of. So, it’s more support, I think, than assessment—particularly if you get the right people in the jobs.

Final ThoughtsBe informed but not intrusive. Don’t get in the way, but make sure, at a high level, that you understand what it is that’s going on and that you’re kept aware of things in a timely way. And again, much of it is dependent on the C-Suite to get you good information on a timely basis. I don’t think the boards can do much more than evaluate it at a pretty high level. Obviously, to the extent that boards have an ability to contact people in the government at a high level, that’s useful. But I think your basic business resumption plan, those basics are the ones that you need to follow, and it’s really management’s job.


‘People Are the Company...This Is an Opportunity to Prove It’Gaurdie Banister, Director, Tyson Foods

The emergence of the novel coronavirus will separate weak businesses from strong ones, says Banister. It gives board members an unprecedented opportunity to assess management teams.

From its rapid and stealthy spread to the dramatic quarantine responses it has provoked, nearly everything about COVID-19 feels unprecedented. Yet, in many ways, COVID-19 represents the quintessential crisis. It has incredible uncertainty and disruption, coupled with the need to manage employee emotions, investor confidence, logistics, supply chain, technology and countless other aspects of the business. All of this has to happen with imperfect information: While government agencies and the media are doing their best to circulate facts, much remains unknown. To be sure, a number of factors make COVID-19 feel unique and more difficult than past health crises—but the same essential rules apply for managing it.

Crises like this do not come around very often, but when they do, they provide a clear test of how well a company is performing on some of

the most important and sometimes overlooked measures of success. As I’ve mentioned in past articles, to be successful, I believe companies need people-centric cultures that include a strong focus on safety, as well as a commitment to operational excellence that enables innovation and continuous improvement. This virus outbreak will serve as a defining moment for companies on all of these principles.

Further, the company’s balance sheet will also be a key element to surviving the crisis, as cash flow and inventories are impacted. While sound financial management is critical to success, the board should separate the state of the balance sheet and how it influences the long-term implications of the COVID-19 disruption from the broader leadership response to the crisis.

Boards have a very important role to play in helping companies and leaders thrive in this crisis. By stay-ing close to their mandate to take a long-term, big-picture viewpoint, directors can provide much-needed perspective and value to the CEO and executive team as they manage through the situation.

People are the Company and This is an Opportunity for Leaders to Prove it The board should be listening for reports from the management team regarding the health and well-being of team members, from the top to the bottom of the organization. Directors should be listening to ensure that all employees have a safe and sanitary workplace, the freedom to express concerns, access to medical care and clear direction about how to handle potentially risky situations, including travel. The board should be briefed on technology and plans for remote work, and scenario planning around potential office and plant closures. They should be aware of plans to resume operations, as well as plans to retain staff who may be impacted by closures. If people at every level are not a focus in briefings, directors should be asking questions.

Discipline and Operational Excellence Win in Good Times and Bad A well-organized crisis response is the hallmark of a strong operational excellence model. In it, a management team will have thought through the myriad potential impacts on opera-tions, both likely and unlikely, and the roles and responsibilities to address them are clear.

COVID-19 presents particular challenges because, unlike a hurri-cane or flood, it is not a single event, and many of the facts are still not clear. Yet, it is still possible to respond with excellence. I serve on the board of trustees for American University. There, AU President Sylvia Burwell, who was secretary of the U.S. Depart-ment of Health and Human Services during the Ebola and Zika outbreaks, gave a spectacular briefing on the


crisis. She offered context for COVID-19, explained what was still uncertain, and then gave clarity on what the university needed to do to deal with it, from creating policies for students who were studying abroad or wanted to leave campus for spring break, all the way through to potential implications for enrollment for next fall.

At this point, management teams should be able to offer their boards a similarly crisp and clear operational response to the virus. They should be leveraging information networks, both inside and outside the company, to get the best intelligence they can. They also should have thought through the near-term implications of COVID-19 on all aspects of the business, including day-to-day operations, financial met-rics, and how to communicate with a broad range of stakeholders including investors, suppliers and customers. Importantly, this should include plans for what to do if any of the manage-ment team members or other critical staff members fall ill—a topic many are reluctant to tackle. If this aspect of the crisis response is muddled or sounds disorganized, the board should express concern and consider how to engage the CEO and management team in a constructive way. In addition, if the board thought the company had a strong commitment to operational excellence and doesn’t see it during this crisis, directors will need to chal-lenge the management team further once the crisis passes.

Stay Strategic, Think Long TermWhen the executive team is man-aging a crisis, it becomes tempting for board members to “get in there with them” and help. However, it is important for the board to resist this temptation (even if manage-ment says they are open to it), as the board is uniquely positioned to focus on a long-term strategic level. For example, what are possible ways the outbreak could affect year-end financials? Do we foresee any supply shortages or other resource con-straints? Could it induce permanent game-changing ways of working, with remote access leading the way? Should the company reconsider the risk that offshoring work represents? These are all things for board mem-bers to start getting their minds around as the team is buried in the crisis response.

This sort of challenge represents a great time to assess the ability of the leadership team to flourish. Directors can assess how company leaders step up to the task of managing a crisis—solving problems and planning for the long-term—when they don’t have all the facts or answers. Extreme ambi-guity is a different kind of pressure than businesses typically face, yet it is an essential one for executives— particularly anyone who is considered a CEO candidate—to master.

Never Waste a CrisisAs the board maintains a long-term perspective, it is important to consid-er any benefits that the organization might be able to glean from the crisis period. Are there staff or organiza-tional tweaks that have been waiting for the right moment and will blend smoothly with the disruption caused by the virus response? Are there efficiencies or processes that seemed difficult or perhaps impossible to implement that are now happening out of necessity because of the crisis? For example, if one plant is down due to quarantine and a second plant has

become exceptionally efficient at handling the extra work from it, why resume the old way of working?

Now is the time for the board to be thinking about questions like this and to raise them with the CEO and man-agement team as things settle down. The core question the board should pose is: What prevents us from mak-ing these changes the norm if they save money and are more efficient?

In the Crisis, but Not in Crisis During my tenure as CEO of Aera Energy LLC, I faced a steep, more than 70 percent drop in oil prices in 2008 in addition to the financial crisis. One of the members of my executive team coined the helpful phrase: “Aera is in the crisis, but there is not a crisis in Aera.” This phrase served as a rallying cry for us to be calm and disciplined in our response to the multiple blows to our busi-ness. We reiterated the belief that we were going to be strong and steady and that we were going to survive. Our board reinforced that notion by taking the long view with respect to potential layoffs, supply chain and contractor management, as well as potential strategic options.

As the crisis ebbed and the econ-omy began to recover, we were in a much better position to capitalize on the upside than others because of our board’s attention to the long term. Importantly, we had the sup-port of our employees and suppliers because we had gone through the crisis together with them, rather than making hasty cuts.

When the management team is in the middle of making sure every employee is accounted for, it is more important than ever for the board to take a long-term view. Furthermore, by maintaining a commitment to the same elements that lead to success in good times—a people-centric culture, safety and operational excel-lence—the board can help a company exponentially increase the likelihood of emerging from the crisis a winner.

WHEN THE EXECUTIVE TEAM IS MANAGING A CRISIS, IT BECOMES

TEMPTING FOR BOARD MEMBERS TO ‘GET IN

THERE AND HELP.’ RESIST THIS TEMPTATION.

“


‘A Humanitarian Crisis Above All’ Claudia Fan Munce, Director, Best Buy, Bank of the West

For Fan Munce, COVID-19 is the ultimate test of boardroom ESG efforts. “People need the director more than anyone because we have the foresight and the oversight responsi-bility. We can chose not to be engaged in the moment.”

‘The Company Is Comprised of People’’This is a time to stay calm on behalf of everybody, even with all this horrible analysis that we’re getting almost on an hourly basis. It is the time for the director, on behalf of the company and in support of the company, to be rational, to be analytical and, of course, to be caring, right? Because, even with all the horrible economic impact, this is a humanitarian crisis above all.

Prior to this crisis, we were all very focused on the social, the governance and the environmental, all the ESG conversations that took place. And then, when the crisis hit, everybody is like, “Oh, my God. The financial, the stress test, the liquidity, the shares, of course, plunging.”

I just remind directors to stay on the position that the company is composed of people. That is, in my opinion, a very important focus.

People need the directors more than anyone because we have the fore-sight and the oversight responsibility. We can choose not to be engaged in the moment, in the almost-fanatic executions that the company has to go through right now. I think the directors’ best practice—in terms of employees, in terms of supply chain, in terms of the shareholder—is to keep themselves in a much more analytic mindset to help the company navigate through this crisis. There’s enough panicking going around for the rest of us, right?

Surely the oversight component is very clear: to make sure the company is prepared for what they need to do in the short term for the potential impact on the business. All compa-nies have, at least the ones where I sit on the board, very, very compre-hensive crisis management plans. Many of these corporations have a pandemic crisis management plan—and even some that do not have one, some, like, California corporations have a wildfire crisis management plan that can be very easily adapted as a framework to generate a new epidemic crisis management plan.

So the board really needs to be exercising the oversight when we have a good plan in place to respond

to, and that plan needs to be very dynamic. Because things are so fluid, they’re changing so much. Who knows what is going to be the next thing? So, the company needs to have a sort of fluid, dynamic plan, and being able to engage with the man-agement team as they redefine this responsive plan is a very critical role that the director can play. Because in many ways, the directors’ oversight is their sight across these kinds of sustainability and continuity plans. That is a role that the director can play.

At the same time, directors can bring foresight. I know it’s unpredict-able, but there are clearly scenarios that are playing out that we need to somehow evaluate, right? Is this going to be a short-term impact? Are we going to see this bell-shaped curve flatten or not flatten? Is this going to be an epidemic that will be here for good? Is this going to be a global financial recession or a reces-sion in general?

There are a lot of crisis scenarios that directors can help the compa-ny play out and establish a different framework of thinking in terms of responding to more long-term needs that a company will have in this pan-demic crisis.

Analyzing RiskThe framework itself is not very different than the normal framework that we have always used. You look at the key business risk management frameworks: What is the operational risk? What is the technology risk? What is the financial risk? What is different now in the planning are the trade-offs that need to be looked at. We were all so focused—and it was such a great topic—on ESG as a high priority. And of course, cyber,


different perspective based on your experience or your expertise area. That is the kind of role the board can exercise at this point because things are clearly very fluid, things are clear-ly changing very rapidly. So, up your engagement and make sure that you are synthesizing all this input, which is already a challenge for the board because the data is poor. I probably read about five reports yesterday alone on what you should or should not do right now.

The director should be engaging directly by bringing their insight, their perspective in helping the company and upping their engagement. But at the same time, being very cautious in synthesizing this abundance of information that they’re getting. How do you synthesize that into truly valuable insights that the company can leverage in defining the response plan, in defining the strategy or change of the strategy, in making tradeoffs, all the things that we’ve talked about?

But burdening them with massive reports or just another 10-page anal-ysis? I don’t think that is helpful at all. I think the director, to the extent that we understand the company, under-stands the business strategy, and we are in a unique position to, in the time of this uncertainty and abundance of information and analysis, to help synthesize all that and provide our unique insights that are helpful to the company and the management team to act on.

Lessons from Sand Hill RoadFor me, the VC community’s reaction, versus a public company, is probably even more transparency and even more frequent communication. This frequent communication is something that a public company can learn to do even more of—and have the leadership show their very direct engagement in the crisis. Like I said,

right? Everybody is so focused on cyber and all the components of that particular risk. The risks obviously are different now, right? The operation-al risk, the health of our employees, our customers. So I do not think the framework changes, but priority and the tradeoffs do change and need to be absorbed on a regular basis.

The best practice that I’ve actually seen from companies is to form a very dedicated group within the board to avoid this “too many cooks in the kitchen” syndrome that happens when you have a very fluid situation. Establish a particularly focused group of directors who are able to dynamically manage the crisis with the senior management team, without the burden of a full board being engaged in an ongoing dynamic tradeoff of risk and investment on the operational side. This risk committee becomes the firm’s first line, not necessarily engaging the full board.

Thinking About StrategyI think there are opportunities presented so this can really be time to shift the strategy. If you are rolling out your digital channel for example, well, guess what? This is a time to accelerate that, right? If you’re thinking that you are following a certain kind of adoption curve on your digital strategy, guess what? That adoption curve just changed its slope. Right?

Just like everything else, if you are absorbing all the sorts of impacts and the changes for risk management, those same inputs also allow you to look at your strategy and say, “There are opportunities.” Remember when everybody was talking about how difficult it was for banks is to get the customer segment that is older on a digital platform for financial services? Now, more than ever, they have to be. So, can you do something here? Can

AT THE END OF IT, THE STRATEGY IS REALLY

NOT ‘CAN I PROFIT FROM IT?’ IT’S REALLY: ‘CAN I

BETTER SERVE.’”

“you encourage them? Can you make it easier out of necessity? People always say necessity is the mother of invention.

This is really a great time for so many of us who care about the human side of it to look at it as also a strategic change that a company can address to better serve their customers. At the end of it, the strategy is really not, “Can I prof-it from it?” It’s really: “Can I better serve?” Strategy in general should be in that tone: “How do I best serve my customer? And is it time to accelerate? Is it time to slow down?”

You’re not likely to have a lot of face-to-face, you’re not likely, going forward, to encourage a lot of the things that we’ve been doing, right? Some of our companies are saying, “Well, our major channel for lead generation is showing up at the trade shows.” Well, guess what? There aren’t going to be any for a long time. What are you going to do for lead generation? That is a very, very significant strategy change for any company.

Working with ManagementThe board is really an adviser. We talk about diversity, but I really think the value of the board—even when it comes to diversity—is cognitive diversity. The fact that you bring a different point of view, you bring a

While this crisis is significant, it also can be made into an opportunity for the company to show its values to employees, customers and investors, says Atkins. And emerge stronger.

COVID-19 presents a big set of down-side risks to be considered, to be sure. But it is also an opportunity for your company to shine, to showcase how it leads through crisis as it com-pared to its peers. It’s a time of high visibility for your company to demon-strate that they are operationalizing their values and corporate culture.

From a boardroom standpoint, the first thing to do is to look at your

company’s industry and assess how much specific financial exposure you might have. Ask management to present on how the crisis ripples through the organization in terms of supply chain, employees, etc. and come back with a recommendation.

Employees are anxious. This is the moment to reinforce your culture by keeping employees safe and signaling the company’s financial strength and commitment to job continuity—balanced with economic reality.

For example, if you are in the travel or hospitality industry, you will have to make some early decisions on work schedules/partial layoffs/ early vacation/sick day choices, as the entire travel and hospitality sector

‘An Opportunity for Your Company to Shine’Betsy Atkins, Director, Volvo, SL Green and Wynn Resorts

this is a humanitarian crisis, and people need to feel the management really cares about the people, about their health, about their well-being.

I think the VCs are doing a really good job communicating to their employees, to the CEOs within their portfolio, giving them a new dimen-sion that we’re not just your investor and here for the financial return, but

we care about you as people, as teams within the portfolio. That, for me, is the difference that I see— the ability to feel free to be very transparent from the top down, to have very frequent communication rather than this very formalized process of employee communication within a public company.

CEOs: Just have a conversation

is down about 50-70 percent in some cases.

The board should ask manage-ment to come back with their best view of different scenarios in terms of duration of the crisis and intensity of negative impacts of the crisis on your business.

To spur this discussion, here are some questions the board may want to pose to management:

• What is the status of the supply chain, and where will there be disruptions?

• What are we doing to keep employees safe? What are our poli-cies, travel bans, etc.?

• What other sourcing back-up plans do we have?

• What is our ongoing communica-tion strategy with all our constituen-cies: customers, employees and community?

In times of crisis, it is best to overcommunicate. The company should plan to send a weekly update to employees, as they will be nervous and will want to understand

with your employees. This really is the time that you need to be active to help them feel a little more calm in the chaotic environment in which they find themselves. I think that voice from the top is something that we see more within the VC community that I think we can do even better in the public companies going forward.



Maintaining liquidity is obvi-ously the top concern, and the board can help, says Gordon. The audit committee or the finance committee can play a key role in helping the CEO think about cash. “You have to

be there to be thinking about it. You have to be in touch with all the issues.”

Board members have to make themselves available for the CEO for any guidance. But your role is to

select a great CEO. So, if you’ve done your job as a board member, the CEO will make the right calls, will be very actively involved in everything that’s happening. But as a board member, you should be more flexible, be available to chat with them. I would not be calling my CEO saying, “What are you doing?” A good CEO would be communicating that with you.

I always say to board members, be there, be available, but don’t be dictating what the CEO should do, unless you didn’t pick a good CEO. That’s a different situation. Board members should be very flexible with their time. CEOs are very busy with a lot of different constituents. If the CEO can talk tomorrow at

‘What Can You Do to Keep the Team Afloat?’Ilene Gordon, Director, Lockheed Martin, International Paper

the impact on the business, their job security, their personal safety and the company’s financial liability.

A weekly update from the CEO to the board will also be an important component of the crisis communi-cation strategy. Either a quick phone call or email update will ensure the CEO and the board are aligned on ongoing strategy changes.

FINANCIAL ANALYSTS MAY START REACHING

OUT TO MIDDLE MANAGEMENT...REMIND

THE ORGANIZATION ABOUT CONFIDENTIALITY.”

“ One concept that may be helpful is to ask the leadership team to come up with a dashboard with some specific topics that they are monitor-ing. Likely, the finance team is looking at the company’s balance sheet and cash liquidity. The company’s sales team is looking at revenue predictions and cancellations, etc.

Be sure all the specific internal and external audiences are clearly defined and that the company’s communication and compliance policies are refreshed.

In times like this, media outlets and financial analysts may start reaching out to middle management to get nonpublic information and insight. It would be good to reinforce/remind the organization about confidentiality, since communication needs to come in a cohesive, thoughtful voice from the leadership team and potentially

coordinated with the board chair, lead director or others, if and when appropriate.

There are some business questions that the board will want to discuss with management. This is the time when the audit committee will want to work closely with the CFO and external resources like auditors on financial reporting and disclosures—for example, where and when quar-terly guidance will be communicated externally. There’s a balance to be struck between external transparency to investors vs. a risk of litigation on keeping information confidential.

While this crisis is significant, it also can be made into an opportunity for the company to show its values to employees, customers and investors. There’s a chance to take a negative and make it a positive by showing how your company leads and per-forms in a crisis.


3 p.m., make it happen. So, you have to be available for the CEO. So that’s always my first point.

My second point is that it’s really a good time to build employee-custom-er goodwill. So what does that mean? No price-gouging. That’s horrible. Flexible policies as it relates to your employees, your customers. The big companies are saying to employees, “If you need to work at home, we’ll support you.”

It’s really a good time, no matter what size business, to build that goodwill, to be very open and flex-ible— and not mandate. I’ve met a couple of people, young people, and they’re like, “Well, my office is open.” I say, “Well, you have to do what you think is right, they’re not going to hold that against you.” But they’re worried about their paid time off, their sick pay. I always say, “You know what? Do what you feel is right, it’ll be figured out later.” So, that’s what I say to CEOs and board members supporting the CEO.

I would expect every company to have sent out some note to their directors to say, “This is what we’re doing. This is how we’re treating people, our employees, and we’ll keep you informed.” Whether they’re on a mailing list or it’s a special note, it doesn’t really matter. That’s always my advice. If a CEO asks, “What should I do?” I would say always err on the side of building good employee-customer goodwill.

The third point really is about cash. You have to maintain liquidity and the board could help here, whether it’s audit committee or finance committee people who have a good familiarity. The bigger companies, we’ve thought about this. First quarter dividend earnings are pretty much set. March is a big month. We’ll see. But second quarter, I would think companies could be running out of cash. It depends on the company. So the board can help the company, the CEO think about

cash. The board member, you have to be there to be thinking about it, you have to be in touch with all the issues.

Re-Assessing Risk?If you had a good framework—and boards are responsible for the enterprise risk management, whether it’s at the board or the audit level—if you have a good system, you’ve taken into account the extremes. Whether it’s product recalls or viruses. This whole situation can tell you if your ERM is particularly well-done, if it’s not holding up: have you identified risks like this? And then, of course, whenever you’ve identified risk, you always have an action plan for each one of those risks when it’s a good ERM system.

The companies that I’m associated with have great risk systems. You have to figure that out. I don’t think people should be redoing it, but they should be proactive.

The risk is you have got to keep the enterprise afloat. So, as a board member, what can you do to help the team keep it afloat? Whether it’s connections at the cash level, advice on what other people are doing, to help preserve customer loyalty and goodwill and employees. You just have to be on top of that, but I would not be redoing risk systems unless you didn’t have one, I guess. Some of the smaller companies might not have had one and now they’re in the middle of it. But good governance always asked for that.

Don’t Change Strategy, Refresh StrategyStrategy is long-term, so I don’t think that it should be changed. That doesn’t mean that it shouldn’t be refreshed on schedule. I wouldn’t let anybody say, “Oh, we’re in the middle of a crisis, we’ll get to strategy in six months.” I would refresh it in the middle of this, if that’s on schedule. Strategy should be refreshed not just once a year, but all the time, but I

STRATEGY IS LONG TERM, SO I DON’T THINK

THAT SHOULD BE CHANGED. THAT DOESN’T

MEAN IT SHOULDN’T BE REFRESHED ON

SCHEDULE.”

“

would not be changing strategy. You have to be calm. You get through this, you figure it out. Short-term actions should be enacted, but the strategy should remain.

Strategy meetings could even be done virtually if they had to be, it depends on people’s schedules. We always had what I call snowstorm board meetings. I remember being on some boards in December, and we were snowed out, so we had a seven- hour board meeting on the phone. So, I don’t see any need to cancel any meetings, they should be held virtually. Board members can be read the material, can be attentive, help management. They’ve got to continue with all of that.

I think that you have to be aware and available and be in tune with what the issues are. I tell people don’t be distracted by the stock market. If you focus on customers and em-ployees and cash, those are the right things to be focusing on right now.

There’ll be a lot that’ll be said and written about this. But for directors, the good news is we’re there and able, and we’ve had a lot of experi-ence. We’ve seen a lot of stuff. You don’t want to make light of anything, but you’ve also seen things come—and you get through it. We’re there to help, to help everybody get through it. That’s the biggest challenge.

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