Good corporate governance practices are essential for efficient, viable and sustainable growth of companies and institutions, including governments. The contemporary view of business is that the Board of Directors and Management are responsible to not only shareholders, but to stakeholders. There are generally two main stakeholders to be considered- external and internal stakeholders. While external stakeholders comprise of shareholders, debt holders, regulators, trade creditors, suppliers, customers and communities affected by the corporation’s activities; internal stakeholders comprise Board of Directors, Executive Management and other employees.
Each group has different interests and objectives and the essence of corporate governance is the ability of the Directors to manage the diverse expectations and interests of the various stakeholders to achieve overarching corporate objectives.
Effective communication during a crisis can make the difference between successfully handling or unintentionally exacerbating the situation. Minor mistakes in messaging can create significant reputational damage. In executing crisis communication plans, it is important to ensure that the Board coordinates and reinforces the purpose and image that the organization would like to project. It is important to slow down during a crisis and really think through what the Board wants to have happen as a result of the crisis.
Many Boards and management teams just immediately react to the crisis rather than thinking through it strategically. Following the outbreak of the Covid-19 Pandemic, a few CEOs had gone to the press with messages that did little to reassure either their internal stakeholders or the larger public. Others have on the other hand, shown and communicated remarkable empathy that had the effect of providing comfort and giving hope in the midst of so much uncertainties.
The Board and Management should resist the pressure to respond prematurely, taking care to ensure that communication that flows to internal and external stakeholders is well though through. In addition to assisting Management in effective communication about the organization’s response to the many dimensions of the crisis, many Boards will need to be prepared to effectively communicate how they have maintained their core fiduciary duties.
The Board should provide support to Management in articulating how the Company’s mission and values align with its response to the crisis and its message to stakeholders. It should review Management’s articulated themes for communicating with stakeholders and help to ensure that the concerns of a wide variety of stakeholder groups are recognized. This includes communication to employees and key investor groups, as well as suppliers, customers, and critical communities. Given the nature of the current crisis, messages concerning the health and safety of employees continue to be of the utmost importance.
Also critical is investor communication as many investors will expect to be able to engage directly with Directors more frequently than they had before. Visibility into the Board’s understanding of the Company and its potential risks has become increasingly more important to investors. Investors also want to see increased disclosure on how the Board is providing oversight—this includes oversight of human-capital Management and ensuring that the Board is aligning Management’s short-term decisions with long-term business continuity.
There is also the responsibility owed to Regulators by way of appropriate disclosures, and compliance. In response to the Covid-19 pandemic, many regulators have granted waivers and extension of time for compliance. The Board should be aware of what these waivers are and to what extent the Company can take advantage of these. There should also be more regular engagement with regulators to ensure there is sufficient understanding of the peculiarities of the impact of the pandemic on the Company’s operations.
Directors should ensure that while supporting Management through the crisis, they are not neglecting their other fiduciary duties. The Board should not lose sight of cyber security – the risk of attacks will typically increase particularly at a time like this when employees are working remotely – sudden departure of senior executives (what plans are in place for succession?) and oversight of enterprise risk management. Indeed, Directors will constantly need to remind themselves of the critical role they have in ensuring that the Company survives the crisis as failure to do will impact all stakeholders.
Bisi Adeyemi is the Managing Director/CEO of DCSL Corporate Services Limited. Kindly forward comments and contributions to badeyemi@dscl.com.ng.