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ESG Watch: Board Practices: A Look Ahead
JULY 13, 2020
Watch this ESG Watch webcast, where experts from Bank of America, Debevoise & Plimpton, and Russell Reynolds Associates discussed how boards are currently responding to the COVID-19 pandemic – and what they’ll need to focus on in the upcoming months. You will also get a first look at our soon-to-be published report on broader trends in corporate governance among S&P 500 and Russell 3000 companies.
Some of the insights from the discussion included:
- Sustain a higher frequency of board communications and meetings. In the initial phase of the COVID-19 crisis, most of the companies we surveyed were communicating with their boards at least weekly. Consider keeping that up, or holding informal calls with your board members on a regular basis. With companies facing the combination of health, economic, and social crises, and an even longer list of topics for the board to consider during this reopening phase, an ongoing high level of engagement with your board is critical.
- Use your existing reporting and monitoring processes. As companies provide more information to the board, it’s probably a good idea to leverage your existing reporting and monitoring processes wherever possible. You may wish to add metrics (e.g., more detail on employee health and safety), and you may want to consolidate information in a COVID-19-related dashboard, but you probably have robust processes in place to collect, verify, review, and report information to the board. You will want information going to the board (and potentially to external constituencies) related to COVID-19 and other crises to have the same degree of reliability.
- This is a time for CEOs to engage with empathy. It’s common for there to be turnover in the CEO’s office a year or two after a crisis hits. Boards are likely to take a close look at whether their CEOs demonstrated the skills and qualities that enabled them to engage effectively with multiple stakeholders, and with empathy. Even as we eventually move beyond COVID-19, those are likely to continue to be key requirements for the corner office.
- Ask your investors for their expectations in addressing social issues. It is easy, when you have a shareholder proposal on a topic such as diversity or equity, to focus on the shortcomings of the proposal itself. But it can pay real dividends to ask your investors, regardless of the language of the proposal, what they believe you should do on the topic being raised.
- Board diversity is an urgent topic now – and there are concrete steps companies can take. It’s helpful for boards to expand their aperture in the director search process to look not just for a sitting CEO or CFO, but rather for a “senior executive” who brings a set of skills and qualities that will make them an effective all-around member of the board. And it’s helpful to provide customized onboarding programs, especially if you’re recruiting a director who has not served on a company board before. Boards that primarily rely on their existing networks of contacts when looking for a new director will likely find it harder to diversify.
Who Should Watch: Current and prospective board members of public and private companies; CEOs, general counsel, and other C-suite executives; corporate secretaries; investors; attorneys; and other corporate governance professionals.