Challenging time for board of directors amid coronavirus outbreak

The Covid-19 catastrophe is disrupting every facet of the social and economic environment like never before. Humanity is struggling for survival against a natural disaster, whose strength to damage humanity is yet unknown. As always, humanity will win and will bounce back with new learnings because of its resilience. A new normal will emerge after the crisis is over. Only resilient and anti-fragile companies will succeed in that new environment.

The board cannot leave the responsibility solely to the CEO for steering the company in this crisis and preparing it for succeeding in the new normal. Similarly, the CEO should proactively engage with the board to get its support and leverage its collective wisdom. The engagement between the board and the CEO should be intensive from now onwards.

The board should quickly assess its capabilities to handle emerging challenges. It should create a red team with select board members and invite experts (eg, epidemiologists, economists, and psychologists) to join the team to bridge the capability gap. The red team will support the board in understanding the ever-changing dynamic situation.

The board should immediately address the issue of succession for the CEO and other critical positions to ensure a seamless continuation of each critical function even if a senior executive falls ill and cannot attend duties for a long period, say three weeks, as it is difficult to forecast how the Covid-19 will spread in coming weeks.

The most important task of the management is to take care of the welfare of employees and their families -- physical and psychological wellbeing. Working from home and the protracted lockdown are causing stress for employees and their family members, including children. Companies should provide medical support quickly, as and when needed. The board must ensure that appropriate teams of executives are created, and systems are established to provide support and it should monitor the system regularly to ensure that it is operating effectively.

It is also important to keep the motivation and morale of employees high. This requires the board to develop bounded expectations for communicating the same to employees. Expectations are to be revised with the flow of new information and revised government policy. This is the time when leadership is under test. Employees should be led with empathy and compassion, particularly when uncertainty about job and salary is looming large on their mind. This is easy to be said than done unless the leadership at every level in the organisation (eg, team leaders) have the right skills. The board should ensure the training of executives who lack emotional intelligence. It might be a good idea to issue guidance on how to deal with team members.

It is not unusual that during this extremely difficult time the organisation culture is under stress. The board should be proactive to protect the same. One way to do it is to create senior management teams to identify anomalies, which provide warning signals about the weakening of the culture. The board should receive quick feedback from those teams and should take corrective actions. In absence of the same, carefully nurtured reputation and relationships with stakeholders will be lost in no time. This is also the time when companies should demonstrate that they are conscious of their social responsibilities by participating in government initiatives in managing the crisis. The board should formulate and implement the strategy without losing time.

Companies might have to change their business model to retain a competitive advantage in the changed internal and external contexts that will emerge after the crisis is over and to take advantage of opportunities emerging from the crisis. The business model should be modified based on learnings during the crisis period. For example, the board should review its existing supply chain, distribution channels, the productivity of employees working from home, problem-solving ability, and agility of the company to build resilience in the ecosystem.

In the short term, companies should reduce expenses and build cash reserves. The board should explore alternative sources for arranging funds immediately after the crisis, if the company does not have an adequate cash reserve. As someone has said, at this point cash is not the king, it is maharaja. The board should focus on its boundary-spanning activities to get support from the government, financial institutions, regulators, and other stakeholders.

Covid-19 like a great teacher has taught us the value of good corporate governance practices. Those promoters who take decisions individually will lose the ground. This is the time for collective decision-making.

The writer is former IIM Calcutta professor and ex-director of IMT Ghaziabad

E-Mail ID: asish.bhattacharyya@gmail.com