Observations From Corporate Directors on the COVID-19 Crisis
By Susan C. Keating
May 19, 2020
'In crisis there is opportunity'
As directors of every company grapple with the effects of COVID-19 on their organizations, it is inevitable that corporate governance in general and boardrooms specifically will be forever changed, in ways both big and small. Since the onset of the pandemic, I have had the opportunity, in my role leading WomenCorporateDirectors, to have conversations with hundreds of board members across the U.S. and around the world to discuss how this crisis is affecting governance concerns, best practices, and their direct involvement with their companies.
These discussions have revealed some new examples and nascent trends of board oversight that may well carry over to post-COVID governance. As we face this existential threat together, but experience its impact in highly different ways, there are some takeaways that might prove enlightening to other corporate directors around the world.
Sharing the pain but incentivizing exceptional performance — executive compensation based more on strategic performance vs. financial performance.
Most directors I have spoken with emphasize that their compensation committees have been meeting overtime to address the issue of executive comp, especially in light of the cessation in many companies of share buybacks and dividends. Many chairs have taken this issue to the full board.
On the one hand, there is a priority on conserving cash and, as has made many headlines, in some companies both the CEO, the board and often other executive officers, are forgoing their salaries or taking pay cuts. Salary reductions — starting at the top and then moving through the organization — are a way for everyone to share the pain in order to temporarily reduce costs and help avoid permanent layoffs.
On the other hand, many boards recognize that their management teams are working in extraordinary ways, under unprecedented circumstances. They want to incentivize that dedication. While there is a lot of pressure to reduce compensation across the board, for some companies, it’s a complicated cultural decision.
Directors acknowledge that executive compensation this year may not be about financial performance, but about strategic performance in keeping the business afloat. They may not want to reduce incentives to top team members who are so critical to getting through this crisis and driving company survival.