Topics:   Corporate Governance,Featured,Leadership,Risk Management

Topics:   Corporate Governance,Featured,Leadership,Risk Management

March 19, 2020

COVID-19 Pulse Survey Reveals Boards Have Confidence in Management

March 19, 2020

NACD this week polled nearly 200 members to better understand how directors and their boards are responding to the coronavirus disease 2019 (COVID-19) pandemic. While the economic, social, and political impacts remain in flux—evidenced in one dimension by the S&P 500 declines and gains of nearly 10 percent last week—corporate boards are in a unique position to help management respond effectively to the short- and long-term implications of the crisis.

Director responses to the pulse survey reflect the early actions boards are taking to combat the crisis, and their responses may have shifted in the time since. NACD’s Resource Center: Responding to the COVID-19 Crisis can help directors govern more effectively through these uncertain times. And NACD’s March 2020 poll reveals how boards have been doing so in real-time over the last week. Several findings stand out:

Boards are proactively engaging with management to address the COVID-19 response.

Nearly 3 of 4 directors (76%) report that their boards have discussed COVID-19 with management. In such times, board collaboration with management is likely to be less hierarchical, more frequent, and can blur traditional lines of demarcation between board and management activities. Many respondents report that they have already taken a serious look at what management has done to prepare their staff and position the organization for a very different operating reality. About half (49%) report that they have reviewed internal corporate communications strategies and slightly fewer (42%) have worked to establish expectations for board/management communications. Further, only 45 percent of boards are pressure testing management assumptions about the business impact of the virus.

Source: NACD March 2020 COVID-19 Pulse Survey

Organizations are putting their people first.

The majority of directors responding report that their organizations are currently focused on the health and well-being of their employee population. Many companies have started to rigorously assess the impact of employee and business exposure to the virus (74%). Most have reviewed the Centers for Disease Control and Prevention guidance for employers (64%) and developed internal communications strategies (66%) to keep employees up to date on evolving plans. Further, in their next board meetings, two thirds (67%) of directors indicate that they intend to evaluate the effectiveness of management plans to protect the health and welfare of the employee population.

Source: NACD March 2020 COVID-19 Pulse Survey

Directors are comfortable with the effectiveness of management’s crisis response at this moment.

Directors generally give their organizations high marks for their initial crisis response and collaboration with the board. Seventy-four percent report that their board gets sufficient information from management and 71 percent find management’s response so far to be effective. In general, directors report confidence in the ability of management to handle the near-term effects of the crisis and are satisfied with what they see.

Many anticipate a short-term business impact.

As of March 16, about a third of S&P 500 companies had disclosed COVID-19 in their risk factors (30%) and earnings calls (33%), according to MyLogIQ, a public company disclosure information aggregator. Numbers are similar for the Russell 3000, where risk-factor mentions jumped from 29 percent to 39 percent between March 12 and 16, per MyLogIQ. In the NACD poll, most directors saw the largest likely disruption in the demand for their products (28%) followed by employee productivity (19%), and impacts to their supply chain (16%) and the capital markets (14%).

Source: MyLogIQ (based on keyword search “coronavirus” and “COVID-19” in public filings from 03/12/2019 to 03/16/2020)

At the moment, few have turned toward the longer-term implications of the crisis.

While much of what is described above displays director’s confidence in the near term, few have looked toward the longer-term implications of the crisis. Somewhat surprisingly, just 14 percent report reviewing risk-transfer options management might have at their disposal, such as insurance coverage on property, supply chains, or business continuity. Just 13 percent report making a decision to postpone a major 2020 investment. Further, only 16 percent report discussing post-crisis plans with management. 

At this early stage in the crisis, NACD’s director members report having initiated conversations with management that revolve around the following types of questions:

  • What are the trigger points for incremental policy actions (to protect employees) and financial actions (to respond to declining product or service demand, material, or labor availability)?
  • If we had to close the books for the first quarter remotely and issue results, could we do it, and could our auditors perform the necessary procedures remotely?
  • What are alternative sources of supply for the materials/goods we use? How quickly can an alternative supply source be deployed and at what change in costs? What does this mean for our budget?
  • How do we address or mitigate key risks locally, and, if appropriate, abroad?

This quick poll shows that boards have confidence in management to support their employee populations and deal with the early stages of the crisis.

NACD will continue to gauge the pulse of its membership as the crisis evolves and becomes more complex to understand the changing governance challenges faced by members and help to identify potential solutions. This includes virtual board and annual meeting management and planning both for potential recession and recovery.

NACD’s March 2020 COVID-19 Pulse Survey results were featured in a Wall Street Journal article on March 18, 2020.


COVID-19. Uncertainty. Fear. Recession. Fiduciary Duties.
It’s essential that directors know what to focus on and when.

Become an NACD member today.

NACD: Tools and resources to help guide you in unpredictable times.

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