The Next Move is a new series that explores the critical choices facing business leaders as they respond to the extraordinary impacts of COVID-19. Each month, we bring a diverse array of expert voices into dialogue with the public across blogs, webinars, social media, and digital seminars.
Join us on June 16th for a discussion on Boards and The New Normal, featuring the four voices below. Click here to register.
Business is starting to reopen while society adapts to the COVID-19 pandemic. But after several devastating months, a return to the pre-pandemic “normal” seems unlikely. The pre-pandemic normal for business was already under strain—and boards were already feeling the call for change.
CEOs had already begun to shift away from a shareholder-focused operating model that had dominated for decades. Mainstream voices like the Business Roundtable and World Economic Forum were acknowledging long simmering concerns about inequality, climate change, and the leadership void being left by major societal institutions. The fragility of the old-normal was already exposed and COVID-19 has accelerated the urgency to change.
As inevitable as a “new normal” seems, neither business nor society have time to design it in advance. Instead, business’s new normal will be created in real time, through the choices made by managers, workers, consumers, investors, and communities. Old assumptions, habits and practices will need to be uprooted and replaced by considering hard questions and correcting mistakes of the past.
Corporate boardrooms will play a pivotal role in this disruption. What parts of the old playbook will directors reimagine, reinvent and rewrite? What should corporate boards be doing now to adapt to the still unknown business realities and societal expectations of a post-Covid world? Uncertainty reigns, but choices still need to be made. Are the tradeoffs that will shape the recovery getting clearer?
To better understand how boards might respond to this moment, we posed a simple question to leaders from four unique vantage points. What is the next move boards should make to prepare for the post-COVID world?
Vice Chair and Co-Lead, Board & CEO Services, Korn Ferry
Take the lead on future scenario planning at a time when executives must focus on today.
As executive teams are currently laser focused on managing the day-to-day operations of the business, boards have become the voice for scenario planning for both global and national enterprises—a voice that keenly considers how today’s decisions will impact eventual recovery and exit from the global pandemic.
Chief among these concerns is how decisions around talent will impact a fast re-start. Many directors agree that talent will be among the key differentiators as companies weather the COVID crisis and emerge in a new world. Boards recognize that long-term organizational health is both human and financial and that paying attention to the needs of both will pay important dividends throughout the crisis and during recovery. This rebalancing of stakeholder priorities to include employees and customers alongside shareholders will have important influence on decisions being taken by CEOs and their teams.
President, SoundBoard Governance and Fellow, Rutgers Center for Corporate Law and Governance
Make employees a top priority.
Boards will be judged on their ability to oversee not only financial performance, but also non-financial performance in an era when the stakeholder model of corporate governance and ESG have been embraced by the business community and mainstream investors. Stakeholder governance becomes much more complex—and necessary—when times are difficult. The CEOs that previously committed to lead their companies for the benefit of all stakeholders will not be able to put that commitment on hold. The cynics who see stakeholder governance, sustainability, and ESG as passing fads, or even hoaxes, will be out in full force.
The boards that “get it” will demonstrate that stakeholder governance and ESG are key ingredients to sustainable recovery, not luxury items that get shelved in periods of austerity. And there’s no better stakeholder for the board to start with than the company’s own employees. It is abundantly clear that people in the United States and around the world are right now facing a mix of health, economic, and social risks not seen in any of their lifetimes. In recent years, they have become reliant on their employers for their well-being on all three fronts, in part because governments have become too dysfunctional to lead. Boards will have to own the corporate mantra, “Our people are our most important asset.”
Lisa Skeete Tatum
Founder and CEO, Landit; Director at Stryker and Union Square Hospitality Group
Be willing to put everything except the True North Mission on the table for consideration.
As organizations move from reacting to reimagining and reinventing, it is important to be agile, creative, and decisive. It’s also important to make the distinction between preferences and items that are truly critical to the core of the business, its values, and its competitive advantage. Now more than ever, boards need to be courageous. Everything except the True North mission should be on the table for consideration. This moment is also a time to clean up those long overdue legacy projects and decisions that would have been unpalatable—or not worth the backlash—before. Slow-metered actions, as opposed to making a series of tough decisions at once, will erode the trust and foundational stability that is needed during times of disruption.
However, we have to balance the courageous decisions with a dose of empathy and humanity. Organizations are experiencing a tremendous amount of pressure and stress while navigating the new normal and the reality of the open-ended nature of our environment. As board members, we must bring a mindset of active engagement to the boardroom. As we listen to the updates and challenges being presented, we must also parallel path our thinking on how we can activate our expertise and access to accelerate our leaders’ time to goal and overall success for the enterprise.
Partner, Wachtell, Lipton, Rosen & Katz
In embracing stakeholder purpose, plan for new opportunities and threats.
As the world seeks to rebound from the COVID-19 pandemic without pre-baked playbooks, grapple with new realities on the ground and understand how the pandemic has accelerated pre-existing trends, directors will be needed to help CEOs make good decisions and reshape their companies amidst uncertainty and stress.
Corporate responses to the crisis have prioritized the health, safety, and welfare of employees, customers, communities, and other stakeholders. Moving forward, boards can help management decide which human capital, social impact, and resiliency/sustainability-maximizing measures should be made permanent and woven into the fabric of the company, its corporate purpose, and the future of work.
Boards cannot be caught flat-footed by the changes to come. The 2020 board agenda should include a fresh look at assumptions underpinning long-term value creation strategies and operating models, where to be proactive about organic and inorganic growth and portfolio reshaping opportunities and stress-testing whether the company is truly ready for the opportunistic takeover bids and resurgent activist attacks anticipated for late 2020 into 2021.
In the face of these difficult choices, directors should take comfort that the Business Judgment Rule applies to informed board decisions regardless of how they appear in hindsight. Boards have the flexibility to prioritize and balance the interests of all constituencies, advance the sustainable, long-term success of the corporation as a whole, and resist the return of short-termist pressures.
Clearly, these changes will require more than just “flipping a switch.” What’s a board’s next move? And how will directors influence the future course of the business if they move now?
If you’re interested in going deeper on these questions, click below to join these experts for a discussion on June 16th.