Key Considerations for Boards of Directors during the COVID-19 Crisis

  • By: Paroon Chadha
  • April 6, 2020
Reading Time: 8 minutes

We find ourselves in unprecedented times. Perhaps for the first time in human history, the entire world is dialed in on a single problem: surviving COVID -19.

It’s All Hands On Deck: The Entire Board of Directors

Much like a natural disaster, COVID -19 has scattered teams across the globe. Its duration is unknown, and every organization will have the impact of a severe economic shock to consider.

Unfortunately, most planning scenarios don’t account for such black swan events. While most sizable businesses have a Business Continuity Plan (BCP), events have a way of decimating crisis planning (as we are experiencing with COVID -19). Yet, the processes and communication protocols established in the BCP are valuable and should still be adhered to.

At the risk of stating the obvious, a crisis of this magnitude can’t be left to the Risk Committee or to a sub-committee under the Audit Committee. This will take the entire board to regularly monitor and maneuver through, as there are several fast-changing scenarios and potentially some structural resets on the horizon for most organizations.

Seven Key Aspects to a Board’s Role in the Crisis

There are seven important dimensions to a board’s role in a crisis such as the one taking place today. In addition to listing them here, we asked CEO’s, investors, and other leaders to share their advice for boards during these unprecedented times.

1. Provide leadership with confidence and calm.

As organizations navigate through this storm, the strength of the board’s support will provide confidence and calm to the CEO and all other stakeholders.

  • The board needs to assess the preparedness of the organization to weather the crisis, especially if it experiences a disproportionate impact due to the nature of its business.
  • The board should also provide a firm moral center to its organization and inspire the right kind of response to this crisis.

“The best practices for boards, which payoff in crisis like the current pandemic, are pushing the CEO and management to do “war games”. In these exercises the focus would be on two aspects: (a) stress tests on scenarios and gauging organizational readiness and (b) critical leading indicators that allow for better real time decisions.”

Professor Amit Seru
The Steven and Roberta Denning Professor of Finance,
Stanford Graduate School of Business

“The board has a critical role in supporting the CEO in crazy times like COVID-19 when the survival of every company is at stake. It needs to reinforce a state of calm and rational strategic decision-making, even if this just means thinking one to two weeks ahead.”

David A. Broecker
Chief Innovation and Collaboration Officer,
Purdue Research Foundation

2. Assess and guarantee employees’ well-being.

The board should help management consider corporate governance issues regarding all key stakeholders.

  • Immediately address the health and safety of the employees. The board should support the CEO’s efforts to ensure a safe environment, provide flexible work arrangements, and allow for absences.
  • Assess and update policies for remote work, virtual meetings, virtual votes and remote board meetings.
  • Develop a plan should an employee or an office location require quarantine.
  • Ensure the company is working to minimize the risk from greater-than-normal remote access and screen sharing requirements.
  • Determine the logistics and protocols for convening virtual board meetings. This is crucial since face to face meetings will not be possible in the short-term. A virtual board management platform (such as OnBoard) should be considered for agility and availability of information in a secure environment.
  • Ensure that Transition and Continuity plans are in place and updated to protect against illness and disruption of the CEO and leadership team. Consider having an up-to-date emergency succession plan is in, place that identifies a person who can step in immediately as interim CEO in the event the CEO contracts COVID-19. Consider the need to implement similar plans for other key persons.

“Clearly, situations like this can at times seem overwhelming. The role of your board (or advisors) in this crisis management is going to be pivotal. Being a CEO during a time of crisis can be lonely and the board needs to provide active, steady leadership in partnership with the company’s leadership.”

Fred Coulson
Founder & Managing Partner,
Five Elms Capital

3. Establish a crisis response and communication plan.

Uncertainty often leads to confusion. To establish more certainty, the board can ensure the organization has a clear communications plan.

    • Messages with information and assurances of continuity need to be sent to customers, vendors, partners, media (and key donors, in the case of nonprofits). Include general counsel on the communication chain to avoid unintended exposures and gaffes.
    • Board and management should have a secure way to communicate beyond simple video conferences. Unsecure communications methods such as email chains, passwordless conference calling, and SMS text messages can inadvertently allow informal communications in an online meeting to become discoverable in future legal actions.
    • For public companies, consider whether previously issued earnings guidance should be downgraded to reflect the actual or likely impact of COVID-19 and, if so, how to describe the reason for the revision. Due to the current unpredictability of COVID-19’s impact, consider withdrawing previously-issued earnings guidance altogether or refraining from issuing guidance in the near term.
    • For Public companies, consider how the COVID-19 pandemic may require additions or revisions to risk factor disclosures.
    • Monitor state and local government advice regarding the day to day healthcare situation. All communication should take government advice into consideration.

“To fulfill this fiduciary obligation, the CEO should engage in a strategic communication initiative that keeps the board of directors engaged and informed, yielding additional confidence in the ability of the CEO and his or her team.”

Stuart R. Levine
Chairman and CEO,
Stuart Levine & Associates LLC

“Social distancing and travel restrictions will force all boards to operate in a distributed fashion. This requires real-time, secure board collaboration to stay ahead of changing situations.”

Armando Pauker
Managing Director,
Tensility Venture Partners 

4. Conduct a thorough impact and vulnerability analysis.

The board should partner with the CEO to conduct a thorough impact analysis, evaluate the largest risks, and assess various vulnerabilities to be prepared for in a variety of scenarios. Indeed, members of the board now have to act like a fast-moving crisis team where immediacy must be the operating principle.

  • Monitor cashflow, capital expenses, and collections to inspect for liquidity risks.
  • Reinforce the balance sheet through credit facilities and draw downs, or dipping into emergency reserves with an aim toward preserving liquidity.
  • Work with lenders on covenant relief, principal deferral, additional loan facility, adjustment to borrowing base structure, and new loans against assets like equipment and real estate
  • Consider a reduction or suspension of dividends policies, if applicable.
  • Monitor a dashboard of leading indicators to gain insights into the business forecast for the next few months as well as emerging issues and risks facing the organization.
  • Review the D&O (Directors and Officers) insurance policy language for provisions that may be implicated by financial distress or any potential restructuring.
  • Research how the government is funding businesses with liquidity using the SBA system and EIDL loans (Economic Injury Disaster Loans).
  • Avoiding any conflict of interest, ask domain experts to make introductions to new revenue streams in order to adapt to employees working from home and businesses operating remotely.
  • Assess and update the organization’s priorities on projects, initiatives, and product roadmaps to sync with the new work patterns and social distancing.
  • Consider whether COVID-19 may have an impact on the functioning of internal controls and audit. For publicly-traded companies, remember that any material changes in internal control over financial reporting will require disclosure in the next periodic report.

“An effective board works side-by-side with the CEO to support the implementation of immediate difficult steps that may have to be undertaken along with supporting flexibility in the business model until some level of certainty is reestablished.”

Christopher Day
Co-founder & CEO,
DemandJump Inc.

5. Track Mergers and Acquisition in your space.

This crisis will rewire supply chains, consolidate competitive categories, and force many organizations into an acquisition in order to survive.

  • The board should track all M&A activity in the space to be aware of any structural changes that may have future implications for the organization.
  • Often crises such as these lead to activism by shareholders and their proxies. Public company boards need to monitor these activities as well.

“In times of crisis, there is always opportunity. Opportunity can be realized by understanding how customer behaviors are changing, and adapting to these changes as your business cycles through the uncertain times. Technology advancements have made this ability to transition even faster.”

Brad Schwer
Indianapolis Partner in Charge,
Taft Stettinius & Hollister LLP

6. Look around the corner.

It is easy in times of crisis to ping-pong from one burning issue to the next.

  • The board needs to help the CEO take a step back to prioritize essential functions, but also look around the corner to determine what (if any) opportunities exist to transform and modernize operations.
  • While the CEO is focused on leading the organization to survive the current environment, the board can recommend select strategic investments to help prepare the company to thrive and succeed in post-crisis.

“In times of crisis, there is always opportunity. Opportunity can be realized by understanding how customer behaviors are changing, and adapting to these changes as your business cycles through the uncertain times. Technology advancements have made this ability to transition even faster.”

Farhan Yasin
Founder, DataClover
Investor, Advisor 

7. Post-crisis, plan for recovery and learning.

  • When this crisis is resolved, the organization has to be ready to stage a recovery. This sometimes requires re-organizations and is often accompanied by recapitalization as well.
  • Throughout this (and any future crisis), the board should ensure that the goodwill and brand equity of the organization is always guarded.
  • Be prepared when the crisis abates to assess the corporation’s handling of the situation and identify “lessons learned” and actionable ideas for improvement. 
“All business reviews should be turned around; first cashflow and receivables review, then balance sheet and then the income statement reviews. Organizations need to think about defending against revenue declines, stabilizing operations towards the ‘new normal’ and planning for urgent cost take-out to conserve cash.”

Paroon Chadha
Co-Founder and CEO,
Passageways, Inc.

This, Too, Shall Pass

Most importantly, if an organization doesn’t have a board (or an advisory board), this crisis should propel you to pull your own board together. Remember, boards exist to prepare for, respond to, and recover from disruptions such as this. COVID -19, too, shall pass and hopefully make our organizations stronger from a governance preparedness standpoint.

We’re Here to Help

Lastly, we’re here to help. As an organization that has supported secure, remote, virtual meetings for more than a decade, Passageways is open for business and stands ready to help you weather the waves of disruption taking place in our world. Whether you are a private, public, or nonprofit organization, let us help you make sure your board stays connected and well-organized even while working remotely.

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About The Author

Paroon Chadha
Paroon Chadha
Paroon Chadha co-founded Passageways in 2003 and continues to lead its business strategy, as CEO. He serves on Boards at Passageways, Big Brother Big Sister of Greater Lafayette, Indiana University Simon Cancer Center, and TechPoint. He was a founding member of, and is an angel investor in several technology companies.