We recently surveyed more than 70 nominating/governance (nom/gov) committee chairs of S&P 500 and F500 companies, and spoke to several of them directly for added perspective, to learn how boards responded to the crisis and what longer-term governance changes they think may emerge post COVID. We found they are overwhelmingly confident that their board has the skill sets and experience it needs and do not anticipate any change in board structure or refreshment practices in the near future.
Board organization & process
Refreshment and Succession Plans
Succession
Boards feel that they are prepared to act quickly and decisively if the need arises. Nom/gov chairs said their boards were prepared with the following succession plans even before the COVID-19 crisis began:
| Executive interim/emergency plans |
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| Executive long-term plans |
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| Boardroom leadership succession plans (chair/lead director) |
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Added perspective
COVID-19 has placed a spotlight on potential weaknesses in boardroom leadership succession planning, with barely half of nom/gov chairs saying they had succession plans in place for the board chair or lead director. Going forward, boards will likely be upping their game as their own succession planning moves up on the board agenda.
Refreshment
Most nom/gov chairs do not anticipate a change to board refreshment plans due to the crisis, despite the new ways companies are being tested as a result of the pandemic. Almost one-quarter of nom/gov chairs expect board refreshment to slow, largely due to discomfort with appointing a director in the absence of in-person meetings.
| No change |
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| Slow refreshment plans |
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| Accelerate refreshment plans |
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A majority (58%) of respondents feel somewhat/very uncomfortable appointing a director to the board without meeting in-person.
| Very comfortable |
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| Somewhat comfortable |
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| Indifferent |
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| Somewhat uncomfortable |
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| Very uncomfortable |
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Added perspective
There is a clear preference for face-to-face interviews when it comes to appointing a director to the board. Directors will need to be pragmatic about addressing boardroom needs and intentional about building personal relationships in an environment where they aren’t traveling.
Committee Structures
Even with the myriad issues the COVID-19 outbreak has raised for companies, boards are not considering any changes to their current committee structures.
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94%
No change
6%
Additional committee(s) are needed
0%
Fewer committees are needed
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Added perspective
Interest in ESG issues continues to grow. COVID-19 has accelerated ESG as a board oversight responsibility, with some boards establishing a specific ESG committee or assigning ESG oversight to a standing committee, sometimes renaming the committee to reflect its expanded scope.
Meetings
Boards met more often and shifted to virtual meetings.
So far
Most boards (40%) increased the number of meetings in March & April to every other week.
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vs. |
Looking forward
Most nom/gov chairs expect a move toward more virtual meetings (84%) and increased formal communications from the CEO and management (56%).
Almost half (48%) expect to eliminate their annual in-person shareholders meeting.
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Added perspective
Boards have embraced virtual meetings in response to the pandemic, but many directors hunger for some return to in-person meetings. With fewer unscripted interactions and shorter meeting agendas for the foreseeable future, boards will need to find creative ways to recreate “water cooler” conversations, deepen the scope of their discussions and make sure they continue to stay well-informed and connected.
Board composition
Boardroom skills
Only 8% said the crisis exposed any skill gaps on their board.
Added perspective
The crisis has highlighted the value of having diverse skills and perspectives in the boardroom. In the heat of battle, operational skills and crisis management were highly valued. Looking ahead, expertise in strategy, risk and digital may be higher recruiting priorities for boards as companies navigate a new normal, yet directors want to be careful not to overlook the intangible qualities of broader-based business and life experience.
Experience
During the initial crisis, boards leaned heavily on company executives, board leaders and directors serving on multiple boards:
High/Moderate Value
Low/No Value
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| CEO/C-Suite |
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| Experienced directors (i.e. directors who serve on multiple boards) |
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| Independent board leadership (Chair/Lead director) |
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| Directors with direct industry knowledge |
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| Longer-tenured directors |
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| Actively employed directors |
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| Directors retired from full-time employment |
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| Shorter-tenured directors |
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| First-time directors |
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Added perspective
The demands on directors’ time have increased dramatically — what was a sustainable level of activity, now is not. Employed directors will be cautious about taking on additional commitments, and retired directors may voluntarily reduce the number of boards they serve on.
Looking ahead
Conducted in the early days of the COVID-19 crisis, our survey found that most nom/gov chairs feel confident in their board composition and structure. As the impact from the pandemic and global economic slowdown continues, we will continue to monitor how boards respond, including any developments in governance and composition.