June 9, 2020
June 9, 2020
As disruption caused by the pandemic continues, boards and their organizations are moving from a focus on employee health and corporate survival to preparing for recovery and a new normal. To better understand the challenges that boards face in this discontinuous environment, NACD surveyed 306 directors across industries. This poll, fielded between May 14 and May 21, reveals the governance challenges directors anticipate facing over the next three months and the top trends that they believe will characterize the new normal for their companies. These findings build on the insights from NACD’s March COVID-19 poll, which focused on directors’ immediate responses to the crisis. In addition to these polls, NACD’s Resource Center on Responding to the COVID-19 Crisis is being updated daily to provide directors with resources to help them govern more effectively through these uncertain times.
In NACD’s 2019 private and public company governance surveys, many directors already reported that their historical strategies were unlikely to survive the next five years. The COVID-19 pandemic has only accelerated the demise of strategic plans. Shaping an effective post-crisis strategy is the top governance challenge listed by respondents to NACD’s May poll, with nearly 6 in 10 (60%) ranking it as one of their top five issues of crucial importance to their boards over the next three months. Also, many directors recognize that they need to become better at understanding the new set of risks stemming from the crisis and their implications: Forty-six percent rank getting up to speed on emerging risk dimensions of the crisis among their top five issues. Ensuring the health and safety of staff (49%) is also rated as a top challenge.
Many important in-boardroom activities have been deprioritized during the crisis. Topics such as director engagement (8%), board succession planning (5%), and director recruitment and onboarding (4%) all sit at the bottom of the list of top challenges over the next three months.
Looking ahead three months, directors surveyed report that changes in work are most likely to impact the recovery of their organizations. More than half (54%) cite changes in the way work gets done as one of their top three trends for the coming recovery period. Another third (32%) rank accelerating digital transformation, landing this trend third out of the 14 options presented. There is some variation by sector, with directors from consumer-focused firms ranking major shifts in customer preferences higher on the list. Further, smaller organizations (those with revenues of $50 million or less) rank access to capital and overseeing financial health as more important than other issues. That said, there is a strong consensus that, at least in the near term, companies will need to find ways to get work done differently than before the crisis and that some of this will likely be fueled by the acceleration of digital transformation.
With many boards meeting with management several times a month, even weekly, the time commitment for many directors has increased. A plurality of directors (48%) report that their boards are likely to spend more time with management after the crisis than before. In doing so through the pandemic, nearly every board has made use of tools to enable virtual board meetings. But directors are split over the effectiveness of these virtual meetings. While just under half (48%) of directors do not believe these virtual sessions to be as effective as in-person meetings, one-third (33%) do. Coming out of the crisis, one can likely expect more frequent board engagement with management, in new and often virtual ways, and between the traditional quarterly meetings on the boardroom calendar.
Consistent with findings from NACD’s March pulse survey, boards remain confident in their management teams’ abilities and plans to navigate through the crisis. When asked to grade their CEOs’ performance during the crisis, director respondents gave, on average, an A grade, with a GPA of 3.8 on a 4-point scale. More than 9 out of 10 (92%) directors report confidence that their organizations will survive the crisis. Perhaps one reason for this is a perception of preparedness. Eighty-seven percent of directors report that their management teams had an effective playbook for responding to this type of crisis.
Now months into the crisis, directors tell us that that their boards should be prepared to answer the following questions over the next three months:
Results from this quick poll of NACD’s membership show that boards will soon turn towards focusing on strategy and the trends impacting that going forward. NACD will continue to provide members with insights, resources, and tools as boards and the organizations they serve evolve their responses to the COVID-19 pandemic.
Black Lives Matter. COVID-19. Fiduciary Duties. Onboarding.
It’s essential that directors know what to focus on and when.
NACD: Tools and resources to help guide you in unpredictable times.