In a recent survey of over 70 nominating/governance committee chairs of S&P 500 and Fortune 500 companies, consultant SpencerStuart asked respondents about how their boards responded to COVID-19 and the nature of any long-term governance changes they anticipated post-pandemic. Somewhat surprisingly, given the issues COVID-19 has created or highlighted for companies, committee chairs do not appear to be in any kind of rush to institute changes—in fact, quite the opposite seems to be the prevailing perspective. Is it just too soon to be thinking about structural or other adjustments to the board? Or, does “stay at home” also mean “stay the course”?
- Succession Plans. The vast majority of chairs believed their emergency succession (85%) and long-term executive plans (81%)were adequate; however, boardroom leadership succession plans were not quite as current, with only 56% saying they had succession plans in place for the board chair or lead director.
- Board Refreshment. Notwithstanding the recent renewed push for more board diversity, 74% of chairs did not anticipate any changes in board composition “largely due to discomfort with appointing a director in the absence of in-person meetings.” For the same reason, 24% expected board refreshment to actually slow down, and only 3% expected an acceleration. According to the survey, 29% were very uncomfortable and 29% were somewhat uncomfortable with the idea of appointing a director without an in-person meeting; only 17% were comfortable. SpencerStuart observed that, although there is “a clear preference for face-to-face interviews when it comes to appointing a director to the board,” in the current constrained circumstances, directors will “need to be pragmatic about addressing boardroom needs and intentional about building personal relationships in an environment where they aren’t traveling.”
- Committee structures. Once again, the survey found that 94% of the respondents did not plan to make any changes to their committee structures—only 6% thought that they now needed an additional committee. According to SpencerStuart, COVID-19 has accelerated ESG as a board oversight responsibility, with some boards establishing a specific ESG committee or assigning ESG oversight to a standing committee, sometimes renaming the committee to reflect its expanded scope.
- Board meetings. Forty percent of respondents indicated that they had increased the frequency of board meetings substantially in March and April—to every other week—significantly increasing the demands on directors’ time.
Of respondents, 84% said that they expected more virtual meetings (my question: who are the 16%?) and 56% anticipated more formal communications from the CEO and management, i.e., fewer casual conversations and unscripted interactions. SpencerStuart advises that “boards will need to find creative ways to recreate ‘water cooler’ conversations, deepen the scope of their discussions and make sure they continue to stay well-informed and connected.”
- Shareholders meetings. In a bit of a surprise—to me, anyway, given that many institutional shareholders and advisors are not exactly high on virtual shareholder meetings—48% of chairs said they expected to eliminate their in-person annual shareholders meetings.
- Board composition. The chairs seem to be quite satisfied with the skill sets of their boards as currently composed—only 8% thought that the pandemic exposed a skills gap. In particular, as the pandemic began, the survey found that boards relied much more heavily on executives and directors with significant experience, particularly directors who serve on multiple boards, are in board leadership, have direct industry expertise or were long-tenured directors. SpencerStuart commented that the “crisis has highlighted the value of having diverse skills and perspectives in the boardroom.” While, in the midst of the crisis, operational skills and crisis management were viewed as critical, other skills might be called for to address strategic and other concerns post-crisis.