It goes without saying that the coronavirus pandemic has been the main topic of our Boards blogs recently. With organisations operating in crisis mode, the pandemic’s effects have touched working patterns, operations and strategic planning.
We’ve asked how corporate boards should be responding and explored the practical measures businesses can keep operating. We’ve identified the advantages that digitalised businesses have in trying to maintain operations and looked at the elements of ‘remote resilience’ that have stood some firms apart from others.
Now, we turn to look at corporate governance. What should your firm’s governance look like now – and what role should the board play in ensuring your firm meets requirements?
Corporate governance in a Covid-19 world
As the coronavirus pandemic took hold, corporate reporting rules in the UK were relaxed, as we reported in March. The joint announcement by the Financial Conduct Authority, Financial Reporting Council and Prudential Regulatory Authority gave listed companies extra time to complete their audited financial statements.
The financial regulator also ‘strongly’ recommended that listed companies review all elements of their timetables for publication of financial information.
At the same time, the regulatory authorities made it clear that some rules – such as those relating to the Market Abuse Regulation (MAR) – remained in effect.
As we move towards a new normal, the corporate environment, as well as the future economic landscape, remain hugely uncertain. What should corporate governance look like in this new world?
Governance in a new normal
Although reporting rules may have been relaxed during the pandemic, boards cannot risk becoming complacent on governance. As we reported at the time, in February the Financial Reporting Council challenged FTSE100 companies to up their game on governance and reporting. This imperative hasn’t gone away, simply been put on a back burner in some areas.
In an interesting whitepaper, The pandemic agenda; how corporate boards are navigating Covid-19 challenges, governance experts Diligent sought first-hand insight into the ways boards are tackling the issues they face.
The approaches being taken by the companies they talked to include:
- Establishing a COVID-19 task force. Having a dedicated committee to ‘spearhead all aspects of the crisis response, financial and otherwise’ can help to expedite thinking and actions.
- Reconsidering their approaches to efficiency. Quoted in the paper, Jamie Orlikoff, Chair of the Board for US company St. Charles Health System noted that the crisis has exposed the fragility of the supply chain and highlighted the benefit of ‘just in case’ planning, something that he anticipates will make businesses ‘very thoughtful about pursuing a just-in-time philosophy’.
- Rethinking ‘resilience’. Board resilience is a well-used term, but in current times, as the paper says, ‘boards are having to find entirely new ways of doing things. It’s less about elasticity and more about evolution’.
- Making use of board intelligence tools – including those that analyse executive compensation, manage environmental performance, benchmark governance and manage the board’s own activities. A clear oversight of the business becomes even more essential when operating in crisis mode, or working in a dispersed way.
What’s next for corporate governance?
The UK Corporate Governance Code was last updated in 2018 with changes designed ‘to help build trust in business’. We looked at the implications of these updates in a previous blog.
Since then – and most dramatically, recently – the world has shifted significantly. Some companies have seen their markets decimated, while others have had to respond to unprecedented demand.
Many boards need to manage their governance responsibilities in tandem with a return to work, or alongside increased pressures to keep businesses profitable or solvent. As the situation continues to evolve, the challenges will change too.
Embracing changes to governance alongside these broader business shifts will be essential. Priorities and the wider world may have changed, but boards still have accountability when it comes to ensuring a robust approach to governance.
Ensuring everyone in the business recognises the role they play will be key – we looked last week at the suggestion that every board should have a chief behavioural officer to help embed this approach.
Board intelligence remains crucial; a board that is in control of the information it needs to drive strategy and support good governance has a far better chance of success. Many boards are turning to digital solutions – such as online board portals – to support them in this. If you want to find out more about the ways boards can embrace digitalisation, you can read our 5 considerations for setting up a successful digital board.
And if you want to read about how a non-profit association embraced digital solutions to deliver greater efficiency and a more robust approach to board information, you can download a free case study here.
Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.