Over the past two months, company directors have abandoned the salubrious trappings of Mahogany Row, with its impressive oak boardroom tables, stunning city views, and all those oh-so-comfortable American Heritage leather chairs.
These days they are slumming it along with salaried hoi polloi. That means sharing a small box on a computer screen along with their fellow board members, where each meeting resembles the opening credits of the Brady Bunch (with whom many directors share a vintage — though the board itself will likely have less gender diversity).
Managing a pandemic in 2020 was not on directors’ to-do lists, so now they must alter their agendas and wrestle with the challenges a Zoom meeting brings as they work to keep their organisations afloat.
Through these virtual meetings, board directors have to make massive, difficult, and ideally long-term decisions. While COVID-19 has accelerated digital transformation, at the same time, directors are realising that we are moving from an era of business growth to one of consolidation and sustainability.
Jim McKerlie is the Executive Chairman at HR technology platform Kendo, and is also on three additional unlisted company boards and works with several others as an advisor.
McKerlie said COVID-19 has changed boardrooms. “I doubt any boards had the risk of a pandemic on their risk register. The improbable is now considered possible.”
He said boardrooms most likely will be conservative going forward. “The business growth imperatives will be harder for management to get through the board. The positive is that the pandemic has forced a digital transformation in three months that many companies would have taken ten years to go through,” he told Which-50.
McKerlie said the main priority right now for the boards he sits on is the preservation of value — defending the positions of stronger companies and ensuring the survival of the smaller ones.
He said cash management is the top discussion; looking for opportunities and cost containment is also on the agenda, as is the safety and well being of staff working from home.
Andy Rowsell-Jones, VP and Distinguished Analyst at Gartner, said, “What is unfamiliar is the extent of it and how it’s accelerated digitalisation, accelerated societal changes and accelerated these political changes that were happening anyway.”
Rowsell-Jones calls COVID-19 “the great reset” where directors are figuring out what the customer looks like.
“There has been a systemic shift in consumer preferences, buying preferences, pricing preferences, product preferences thanks to COVID-19; that’s really the focus for most directors.”
What’s on the agenda?
With this disruption, new discussions have emerged for directors. Louise Petschler, General Manager of Advocacy at the Australian Institute of Company Directors (AICD), claimed directors first and foremost care about the health and wellbeing of their employees.
“The first thing directors did was decide how their companies would operate — whether that be at home or on-premises,” she explained.
She said directors are dealing with the challenges of overseeing a workforce that is working from home, who are in not ideal circumstances and are quite disrupted in terms of dealing with these immediate crisis impacts.
“That’s been a really interesting common thing — the unifying early crisis and continuing focus of boards is the physical and mental wellbeing of their people.
“There’s obviously important fiduciary duties for directors in terms of work health and safety considerations, but that’s been very much front of mind and continues to be as we see this environment roll forward,” Petschler added.
For Gerd Schenkel, Chairman of fintech CreditClear, the company had plans in place allowing staff to work from home.
While it was a minor change for the staff at CreditClear, Schenkel said board members have a duty of care in terms of making sure employees are safe and have the right levels of encouragement and support.
Another factor directors are considering is the practical measures for boards as they are making difficult, challenging decisions.
Petschler said, “They’re supporting their management teams around making stand-downs, around layoffs, around closing otherwise viable businesses that weeks before would have been businesses or community organisations that were operating as normal, to suddenly being in this environment.”
With the majority of boardrooms now using some form of video conferencing software to hold their meetings, some directors are still trying to work out the kinks and make the best of the situation.
One of the major problems for directors is reading body language and gauging if their management’s gestures match what they’re telling the board.
Rowsell-Jones said when you’ve got them in the room, you can watch them carefully.
He said typically there is a Chair chatting to one of the managers who is presenting to the board, and the other directors can watch carefully, looking for telltale signs.
However, on video, it’s much more difficult to detect. “As a director it can be difficult to judge whether the management is being entirely honest,” he said.
Earlier this month, ASIC gave the green light for companies to be able to hold virtual AGMs due to social distancing rules put in place. This will last for six months from 6 May 2020.
Schenkel said CreditClear recently held an AGM with its shareholders, which brought up some governance nuances for them — such as deciding what the voting mechanism will be and how to deal with proxies. He said, “It’s not insurmountable, it’s just a little bit novel.”
Another issue virtual meetings brought up was connectivity issues — especially in an AGM where a board member might not be able to vote due to a poor connection.
He likened this to pre-COVID, where one of the risks of being late to a physical meeting was because your car broke down.
“In most cases, it’s more than connectivity that is sort of the annoying thing in most meetings. There’s some issue with someone dropping out, and that does reduce the quality of conversation for complex issues.
“If you have ten people, all ten are important. With drop-outs every two minutes, you simply can’t have a proper conversation.”
Effect on digital startups
As the CEO of a digital company, Geoffroy Henry, CEO and co-founder at Loadsmile, said the transition to working from home and holding boardroom meetings was “barely impacting the business”.
Loadsmile is a technology company aiming to reduce waste in the logistics sector.
The only issue Henry raised was in decision-making. He said, “We are seeing that decision-making, taking initiatives and developing new projects is something that is slightly trickier because it’s harder to get everyone on board or to make sure that everyone is aware of what other teams are doing.
“We need to have more touchpoints and more formal meetings to be able to have a very clear picture of what the projects are, what the timeline is, and the objectives.”
Thomas Andersson, co-founder and COO at Loadsmile, agreed, saying the company’s main investors sit in Europe so these virtual check-ins are a part of the job.
At Loadsmile, Henry said the first few meetings when COVID hit were focusing on what was happening.
“So as soon as it hit we actually had to restructure a lot of things to really define what was going to happen, how it was going to impact us, make different scenarios both financially in terms of customer acquisitions and make sure to prepare for the different potential outcomes,” he said.
Henry explained they were pretty much being careful of what was happening, and the new routine became the new normal.