AICD research in collaboration with the Governance Institute of Australia reveals how boards have responded to the challenges of COVID-19 and its impact on board performance.
The AICD conducted in-depth individual interviews with board members of organisations operating in various sectors, including directors of large listed organisations and NFP entities. This was supplemented by a survey responded to by 469 AICD members from a mix of industries and company sizes, with 45 per cent of respondents identifying their primary board role was for a NFP, 18 per cent for SMEs, 11 per cent for large private boards, 12 per cent for listed boards, and 14 per cent from the public/government sector. The Governance Institute conducted two “Chatham House” roundtables with senior governance and risk professionals.
Insight 1: Virtual meetings are now part of the landscape
- Effective meetings require a different style of chairing, and all directors need to be aware of virtual meeting protocols. The chair should establish the ground rules upfront and regularly review their effectiveness.
- Virtual meetings impact boardroom dynamics. It is difficult to replicate social and informal interactions online.
- The significant time, cost and travel savings from virtual meetings could positively impact on director recruitment and foster diversity on boards.
- When physical distancing restrictions ease and there is a return to business as usual, there is generally an expectation that boards will revert to face-to-face meetings. However, some meetings may be virtual, and it is worth taking a deliberate approach when considering whether a physical meeting is necessary.
- Technology should be seen as an enabler, not an end in itself, and there is certainly a role for technology in promoting agility and getting boards together quickly. “Big ticket” items on the board agenda such as strategy, financial accounts and remuneration decisions are likely to require deeper and more free-flowing discussion, which may be better suited to an in-person meeting. However, topics that are more routine in nature, certain board committee meetings or ad hoc meetings where the board needs to meet on an urgent basis, may be better dealt with virtually.
- Organisations should be encouraged to think about how technology could impact on director recruitment and foster diversity on boards. One of the primary benefits of virtual meetings is that they significantly reduce travel time, particularly for those boards with interstate or overseas directors. Reducing travel time and geographical restrictions on meeting could have a positive impact on increasing board diversity, for example by allowing people with physical disabilities and caring responsibilities to participate in meetings, as well as directors based in regional Australia. For boards that meet after hours, as is the case for many NFPs, this could also give better access to directors.
“Going forward, virtual meetings will be more accommodating for directors who can’t travel or are based overseas. But we will continue to hold in-person meetings. It’s incredibly valuable to still have the face-to-face.” – Richard Goyder AO FAICD, chair Qantas, Woodside Petroleum, AFL Commission
“There is no way we will go back to a carbon copy of the way things used to be. We need to get back to having face-to-face meetings, but videoconferencing should also become a routine part of the arsenal to supplement the physical. Boards should stop and question whether it is truly necessary to have everyone flying in to one location for a physical meeting every time.” – Ken Dean FAICD, chair Mission Australia
Insight 2 – Crises require agile decision-making
- When in crisis mode, the board adds most value when it provides strategic oversight and supports management in both immediate and long-term planning as well as stakeholder engagement.
- Knowing when to intervene versus when to respect boundaries has been a key issue for boards. Directors must remain “alive” to the risks and opportunities of board involvement during a crisis.
- The chair also plays a crucial role in keeping other directors informed, particularly regarding how decisions have been received internally.
- Strong foundations must be fostered before — not during — a crisis. It is important that lines of communication between the chair and CEO are open and used often.
- Boards should lessen, rather than add to, management workloads. Crises test relationships between board members and between the board and management.
- The company secretary plays a key role in ensuring the appropriate information is provided to the board and in managing information flows. The company secretary should be comfortable with acting as the “go-to” for directors on technology to ensure that board and committee meetings run smoothly.
- It is important that directors do not feel like they are in a ‘vacuum’ post decision-making. The chair should keep directors informed of how decisions have been received internally.
- Organisations should consider how they can keep board packs shorter and sharper, even when not operating in a crisis. If events are moving rapidly, verbal updates from management can maintain currency in changing situations.
- Once the immediate crisis has passed, boards should carefully review their own performance, not just that of the management team. Reflecting on what went well, what did not and what could be done differently builds resilience on the board — both from a capability and relationship perspective.
“In a crisis, everyone just needs to roll their sleeves up.” – Dr Sally Pitkin FAICD, chair Super Retail Group, director Link Group
“To better assess risk, two directors spent time with the team in an outreach session to directly observe what they were doing and how patients were responding. That was us road-testing the risk ourselves. Staff were grateful to see us out there on the street. It was confronting, but a really invaluable experience.” – Fiona Payne GAICD, chair Therapy Focus, 360 Health + Community
Survey respondents were asked:
“How often will your board meet virtually going forward?”
- 2% said permanently
- 42% frequently
- 52% occasionally
- 4% never
- Contingency planning and stress testing in advance of crises are critical to building organisational resilience. There should be no complacency that this can be “workshopped” in real time.
- Embed regular and robust reviews of work health and safety processes as part of ongoing risk management. There should be knowledge and communication of these practices at all levels of the organisation. The board, especially the chair, should monitor the wellbeing of the CEO and senior leadership, providing support as needed.
- Crises can push people to their limit. Think carefully about the make-up of your board. It’s not enough to have people who will perform well during business as usual — boards and organisations must have people who can work well together in an environment with different dynamics and pace.
“The crisis has highlighted the importance and need for upfront contingency planning.” – Liesel Wett FAICD, chair Goodwin Aged Care Services, CEO Australian Pathology
Insight 4 – Technology can elevate stakeholder voices
- An effective crisis response requires proactive engagement with key stakeholders. The chair and the board, working with management, have a key role in overseeing this outreach and delivering key messages to staff, customers, investors/members and the community.
- The COVID-19 crisis has brought about a rethink on how organisations are able to keep their finger on the pulse of the broader community, in new and imaginative ways. This is especially important for many charities and NFPs, whose work is often intrinsically connected to a sector of the community.
- Organisations should keep their stakeholders front of mind in a crisis. The benefits of communicating the crisis response are clear over the longer term, from a risk management and strategic perspective, to having improved stakeholder and community standing.
- Technology should be used as a platform to increase connectivity and reach with stakeholders, even beyond a crisis. This is particularly important when there are geographical barriers or stakeholders are remote.
- Boards should undertake regular stocktakes of their key stakeholders and the means of engagement. In the event of a crisis, knowing in advance who to reach and how best to reach them can help mobilise communications more rapidly.
“Having a seasoned board with strong and diverse experience — particularly crisis experience — can be invaluable. Former CEOs can be a great addition to boards for this very reason. They are often more solutions-oriented.” – Michael Chaney AO FAICD, chair Wesfarmers
Do we need to check that our company’s constitution allows for a virtual or hybrid AGM?
The Treasurer’s temporary relief also affects the operation of the constitution of companies regulated under the Corporations Act for the duration of the temporary relief. This means companies will be temporarily able to convene a virtual meeting even where the constitution may not expressly allow (or otherwise restrict) meetings being held in this way.
The situation is less straightforward for incorporated associations and charities that are companies limited by guarantee, as there are different requirements and relief depending on whether they are regulated by the ACNC or a state regulator, as well as the terms of the governing documents. More information at aicd.com.au/nfp-guidance
Measures that can be taken to ensure the security of virtual board meetings:
- Enable two-way encryption
- Set up user registration and authentication
- Mandate password security
- Enable virtual waiting rooms for presenters
- Ensure recording functions are switched off, particularly where sensitive decisions are being made.
Research recommendations for boards and company secretaries
- Technology is an enabler, not an end in itself. The chair should set up meeting protocols early and regularly review their effectiveness.
- Shorter, more frequent board meetings are necessary in a crisis, and to manage fatigue from the use of technology.
- Crises test relationships. Strong foundations must be fostered before not during a crisis.
- The chair and CEO must communicate openly and often. This should include checking in on the welfare of the CEO and providing support where needed.
- Boards should accept ambiguity and lessen, rather than add to, management workloads. Requests for information should be channelled through the chair and be necessary in order to allow informed board decision-making.
- Minutes are more important than ever, particularly where the board is making decisions around the financial sustainability of an organisation or where there are challenging decisions that may attract increased stakeholder or regulator scrutiny.
- The company secretary plays a key role managing information flows. The company secretary should be comfortable with acting as the “go-to” for directors on technology to ensure that meetings run smoothly.
- The COVID-19 pandemic has shown that crises can push people to their limit. It’s not enough to have people that will perform well during business as usual — boards and organisations must have people who can work well together in an environment with different dynamics and pace. Boards should understand the strengths of their management team and foster skills and dynamics that will support organisations through a crisis.
- Contingency planning and stress testing in advance of crises is critical to building organisational resilience. There should be no complacency that this can be “workshopped” in real time.
- Organisations should keep their stakeholders front of mind in a crisis. A crisis can represent an opportunity to reset relationships and rebuild community standing.
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