Day: October 1, 2020

A thought leader and an action catalyzer rolled into one – Anil Puri is a rare combination of a visionary, and one who has mastered the art of strategic and tactical thinking to the core. He has been using this combination to seed new ideas and to lead them to their implementation onground. This has been a consistent feature of his career. He has been keenly watching the wide spread disruption caused by COVID 19 across the board in all contours of the industry. The spontaneous and immediate impact was on the organizations, HR & employees. Corporate governance is a mechanism which has key roles for board of directors and the management. The functional relationship between them is a bond tied with the thin wire of corporate culture, mutual understanding and regulatory guidelines. COVID 19 has transformed this space to usher in more transparency and obliterate the opaque side of the management. In this series of five articles so far, he has attempted to discuss the impact of COVID 19 over organizations with reference to roles of HR, people, processes, technology and corporate governance, and will be closing the series.   INTRODUCTION COVID-19 has created unique and very profound challenges. During the COVID-19 pandemic, with organizations facing high-stakes, high speed decision making, the need for good governance and risk management practices has never been felt greater. Just as boards and senior executives settled into new, enhanced governance processes, their operating environments have abruptly changed with COVID-19. The COVID-19 catastrophe has not only posed an unprecedented governance challenge, it has also ushered in a period of great experimentation, a time for boards both to question old habits and imagine new possibilities – from creative approaches to maintaining effective communication in virtual boardrooms to establish new ties with external peers, from diving into operational minutiae to preparing for long-term survival, and from managing financial details to ensuring that the employees are healthy and safe. The global perspective In light of the fast changing environment, globally across the spectrum of industries and sectors, it is emerging that the management and boards of directors should continually review their practices to ensure that they are right and relevant for the current environment, and that they are not sowing the seeds of future conduct issues. Elements of good governance and risk management practices are critical for organizations to undertake in order to flourish post COVID-19. Organizations that get this right will flourish post COVID-19, while poor governance could prove to be fatal. The paradigm shift The key highlights of the paradigm shift happening globally can best be summarized as under:- Boards are going virtual and managing the challenges of remote work.  The board chair is in the spotlight.  The lines between the board and management have blurred. Boards are taking the long view & putting people first. Sharing learning’s in real-time A crisis-ready board has a plan and the right people in place. Liquidity and capitalization considerations are being taken care of pro-actively Executive compensation matters are a concern. Take over defenses and preparedness are prominently figuring in the minds of the directors and managements. What constitutes the good governance and risk management practices? Both the private and public sectors are re-defining what constitutes good practice. Navigating the COVID-19 crisis requires careful consideration of a range of issues underlined in the opening sentence under these unprecedented circumstances. This article outlines several corporate governance issues for the board of directors which is charged with overseeing the short-term and long-term health of the corporation and its business prospects to consider as their companies respond to the challenges and risks posed by the COVID-19 pandemic. The balancing act for boards has suddenly become more complex as there are many significant short term impacts arising from the longer-term objectives being pursued by the board of directors and the managements. Some of the constituents of the good governance and risk management practices are listed below:- Maintain appropriate board and sub-committee oversight.  Maintain an appropriate risk appetite, risk framework and metrics. Ensure risk information is of high quality and flows freely.  Adopt an approach to regular, in the moment, self-assessments and review. Communicate clearly on purpose, values and culture. Active steps for Corporate Governance In light of director oversight responsibilities and as a matter of good corporate governance, some specific active steps for boards to consider in response to COVID-19 include the following: Enhancing the company’s existing reporting and information systems that are used by the board to provide oversight. Such a system would help ensure that the board is able to receive relevant information in a timely manner to monitor COVID-19 issues and their potential risks to and effects on the company. Once a system is implemented, a board should be active in its monitoring of significant issues so that it stays informed of material business risks and red flags resulting from the COVID-19 pandemic. Forming a committee. A possible tool available to a board to address its monitoring and oversight responsibilities is to create a committee that could be tasked with evaluating and, if necessary, adopting any available preventative and ameliorative measures regarding the impact of COVID-19 on the company’s operations and affairs. Timely and sufficiently detailed minutes and resolutions should document the proceedings of the committee and provide evidence of the activities conducted, matters considered and decisions made by the committee. If, after due consideration, the committee declines to adopt any measure considered, clear, contemporaneous committee records would then be used to support a showing of good faith in the committee’s efforts to evaluate such measure. Enhancing communications with company management. A board should consider increased and sustained open dialogue with company management on both the business risks and the workplace health and safety issues posed by COVID-19. Boards and management should review legal and regulatory developments regarding COVID-19 at both the federal and state levels, review the company’s risk-mitigation policies and protocols and adjust such protocols as necessary to conform to developing regulatory circumstances (especially if a…