The COVID-19 pandemic has thrown several new challenges at boards and organisations, demanding massive transformations in business and legal practice.
For corporate legal counsels, steering through and adapting governance changes will be important to assist their organisations through current and future crises.
The Australian Institute of Company Directors (AICD) and the Governance Institute of Australia have published a new report about the impact of COVID-19 on board practices and insights into the governance challenges in the current climate.
AICD CEO and managing director, Angus Armour, said conversations with directors and research have shown that the rolling uncertainty of the pandemic compelled boards and organisations to adapt and innovate.
“Boards and organisations should reflect on the lessons from this period and what they mean for future governance practices,” Mr Armour said.
The report stated that given how fluid and fast-evolving the COVID-19 situation has been, the flow of information has become central, and in-house counsel and management need to ensure that boards are equipped with the latest information to support their decision-making, from operations and finance to risk and compliance.
“In a crisis, everyone just needs to roll their sleeves up,” Dr Sally Pitkin FAICD, chair of Super Retail Group, director, Queensland Performing Arts Centre and Link Group said. Whilst another senior governance professional stated that “communication lines need to be set up early. You don’t want to be handing out information individually.”
For in-house teams, providing guidance and close access to management about the information the board needs in advance ensures that valuable time is not wasted working this out in the midst of a crisis.
“Importantly, management needs to be able to triage the critical issues and present this information in a manner that enables directors to quickly distil the important points and assess the evolving impacts of the pandemic on the organisation,” the report stated.
In-house counsel can ensure strong processes that set out how situation updates are provided in a crisis, to whom they will be given and how often, should not be underestimated.
“Our boards need to see better information in real-time. This has increased pressure on the executive team,” David Munday, chief governance & legal officer/company secretary, Regional Australia Bank said.
In a crisis, the company secretary also now plays a key role in ensuring the appropriate information is provided to the board in a timely manner.
Company secretaries report being very stretched with many taking on an expanded role – often juggling the legal, company secretariat and compliance functions during the crisis.
“The company secretary is seen as the stabilising ship or port of call to answer questions like ‘how do we get this document signed?’ The challenge is to keep on top of things,” one senior governance professional stated.
Company secretaries are also being more conscious of the importance of capturing key assumptions and boards’ reasons for making decisions given the uncertain circumstances facing all organisations.
This is critical for managing risks, particularly for regulatory compliance and/or the prospect of future litigation such as class actions.
Preparing for future crises
The COVID-19 crisis has also brought about a rethink about how organisations can shape their contingency planning and business continuity in future crises.
Legal teams and management must place importance on contingency planning and stress testing in advance of crises is critical to building organisational resilience.
“Overwhelmingly businesses rose to the challenges presented by COVID-19 but, as the report highlights, a comprehensive continuity plan was lacking for many and will be essential in order to tackle future crises,” Governance Institute of Australia CEO, Megan Motto said.
“Planning precisely for a crisis is difficult, but ensuring you have the right scaffolding in place for when a crisis hits must now be a key focus for organisations.”
The report revealed that too many organisations were taken by surprise by the COVID-19 pandemic as a result of not having a comprehensive continuity plan, “with boards and management instead ‘workshopping’ contingencies in real-time.”
“Instead, crisis plans should be a blueprint not a rulebook, simple yet robust, so that the board can be prepared yet adapt its response depending on how the situation unfolds,” the report stated.
In-house teams can work closely with management to ensure a set of rules and a sound process within which good decisions can be made, executed and communicated which are essential to fill the gaps that a crisis inevitably creates.
“Agility, ingenuity and conduct of people are undoubtedly the most important tools in the toolbox for meeting any crisis head-on and will make or break any successful response,” Lisa Chung AM FAICD, chair of The Front Project, director, Australian Unity and Artspace said.
“In saying that, while it is vital to have the right people in key roles, it is also absolutely critical that you have the right scaffolding in place.”