Core Executive roles of a company in a Covid 19/ Post Covid 19 environment.

 

What do you think are the core executive roles of a company during a crisis?

The World Economic Forum (2020), stated that the Pandemic is fast-tracking major shifts in the direction of further integrated methods for corporate governance. This has built up momentum for a period of time. Covid 19 has uprooted communities, sources of revenue and organizations within every sector on a global scale.  Covid 19 deeply highlighted the need for organizations to communicate actively with all of their stakeholders both internally and externally to communicate the plan for business going forward. Additionally, organizations themselves have become stakeholders, with their own environment. They are completely responsible for how they prove flexible and their capacity to withstand the present financial, societal and environmental state during this Pandemic.

Leaders and executives need to adjust their strategies, predominantly investment portfolios. The economic environment and the volatility of markets need to be strongly considered with significant drivers towards value adding activities in the ongoing future. Whilst organizations acclimatize to changed financial frameworks, remote working arrangements and higher expectations subsequent to this global pandemic, together with constant environmental limitations and an increased interest in digital transformation, organizations need to strengthen their attention towards value adding initiatives. These consist of innovation, mental and physical health, talent acquisition, organizational culture and firming up stakeholder relationships.

Do you think new strategies are needed? And if yes, any suggestions?

Paine (2020) stated that executives are now confronted with multifaceted realities resulting form the Pandemic. This different environment is branded with challenges and difficulties from numerous stakeholders, increased opportunities for social engagement and corporate citizenship. Executives are being affected by these difficulties.  Which pose new and unchartered territory as new ways of working have been exponentially increased.  Executives are required to think outside the box and systematically develop ways regarding significant challenges to organizations and a path forward beyond the pandemic.

Mc Kinsey and Company (2021) referenced the Pandemic, saying at this time, everyone plays a vital role within the organization. It is mentioned that upskilling will become a norm, Bank tellers becoming financial advisors, younger managers leading large projects and organizations interested in persons who are very tech savvy.

Harvard Kennedy School (2020) has reported that this pandemic is showing us that stakeholders are vital to the organization’s success.

With remote working what do you believe will become of all the physical office spaces once occupied?

Mc Kinsey and Company (2021) conducted a survey which indicates executives’ plans to reconfigure spaces, terminate existing leases and shift towards less and more affordable locations.

It can be said that distant working from homes and makeshift offices increases cyber security risks. Technology information and information security personnel are wrestling with an obvious demand for hardware and other infrastructure to be able to work at home. This is inclusive of firewalls and different measures of security software.

EY (2020) stated that organizations need to consider creating pandemic related policies, procedures  for communication, telecommuting and leave administration to curtail disruptions.

Innovation is crucial to resolving many problems which executives may now face.  Business is now evolving and there is a need for new technology, new behaviors upskilling and a measure of unlearning and learning.

As lockdowns lessen and sections of the economy revive, we are seeing that the threat of second and third waves and new virus strains and unexpected outcomes will hamper growth and cause investors and businesses to be very frugal. Economic downturns, business closures and increase in unemployment may be on the rise with an end not in clear sight.

Panetta (2020) indicated that Executives need to consider three different principles for decisions going forward:

- Traditional business value: which will assist in preserving financial health and viability of the business. 

- Crisis and disruption: To manage the aspect of health and safety of stakeholders 

- Social and emotional: This enables protection of emotional health and deliver value which reflects current societal priorities

Executives need to think of these three principles as equally significant. Organizations need maintain financial health to be able to provide any social benefits to the community. However, they need to ensure not only to focus exclusively on financial health as they may risk paying a high brand price later on. IBM (2020)

IBM Institute for Business Value has shown that executives are now prioritizing these capabilities. This signals a massive shift in prioritization. Executives are clearly telling us they plan to emphasize workforce safety and security, cost management, and enterprise agility. IBM (2020)

PWC (2020) wrote that the pandemic did fast-track the requirement for upskilling within the workplace. Also, it created the new wave of work from home. In May 2020, a survey conducted did show work from home may be a permanent option with organizations as strategies become geared towards digital transformation.  Executives and CFOs are optimistic that digital transformation will be the way post pandemic.

However, this will increase the gap between individuals who may have challenges with cost to access technology, technologically savvy or experienced persons and the ability to work digitally. This creates a bigger divide between those who have and those who don’t. Employees will be afforded the advantage of upskilling and progressing their skill level, having a noteworthy lead over those without this opportunity. Executive will need to approve the development of learning programs to enable this upskilling and retraining to permit this organizational shift. Support needs to be transparent from the head of the organization to enable the changes and foster this learning environment.

OECD (2020) has specified that the pandemic has uncovered the weaknesses of persons, communities and economies. This is requiring, change in how financial and community events are planned.

 Existing ways of how we share information during the pandemic is critical to preserving trust amongst stakeholders, reestablishing drive and assurance, and maintain firmness within the economic market. Whereas some organizations may use specific strategies to share information and have selected persons to route communication through, this sometimes results in delayed communication or inaccuracies.  In the present business environment and with the magnitude of information shared in the world, it is essential for business to be timely and accurate with sharing information. Communication and an alignment via all channels should be created and maintained.  (e.g., social account for the business, company website and public relations announcements).

A global event like Covid 19 can increase difficulty owing to the dissemination of incorrect information and stories on social sites. To deliver consistent and appropriate business information and communication, businesses need to create a strategy that plainly shows the required method and procedure to communicate with stakeholders.

Groysberg and Baden (2020) mentioned in detail that one particular issue mentioned by many executives was the challenge of positioning the business to survive during the Covid 19 crisis and preparing for the new way of working that comes after.

Executives can ask themselves at this time-

How can the organization survive this pandemic and maintain competitive advantage?

What learnings can the organization take from this experience?

It can be said from one point of view that fairness within the organization is vital. At this time it is vital for organizations to observe and actively apply learnings as the world changes requires more focus on health, environmental and community in addition to financial targets.

References: 

1. Groysberg, B. and Baden, K. C. (2020) The COVID Two-Step for Leaders: Protect and Pivot. Available at https://hbswk.hbs.edu/item/the-covid-two-step-for-leaders-protect-and-pivot (Accessed: 18 January 2021)

2. EY (2020) COVID-19 and pandemic planning: How companies should respond. Available at https://www.ey.com/en_in/covid-19/covid-19-and-pandemic-planning--how-companies-should-respond (Accessed: 18 January 2021)

3. Harvard Kennedy School (2020) How COVID-19 has changed public policy. Available at https://www.hks.harvard.edu/faculty-research/policy-topics/public-leadership-management/how-covid-19-has-changed-public-policy (Accessed: 18 January 2021)

4. IBM Institute for Business Value (2020) COVID-19 and the future of business. Available at https://www.ibm.com/thought-leadership/institute-business-value/report/covid-19-future-business (Accessed: 18 January 2021)

5. Panetta, K. (2020) A Framework for Executive Decision Making During COVID-19. Available at https://www.gartner.com/smarterwithgartner/a-framework-for-executive-decision-making-during-covid-19/ (Accessed: 18 January 2021)

6. Paine, L. S. (2020) Harvard Business review, Covid-19 Is Rewriting the Rules of Corporate Governance. Available at https://hbr.org/2020/10/covid-19-is-rewriting-the-rules-of-corporate-governance (Accessed: 18 January 2021)

7. Mc Kinsey and Company (2021) COVID-19: Implications for business. Available at https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-for-business (Accessed: 18 January 2021)

8. Mc Kinsey and Company (2020) Coronavirus: 15 emerging themes for boards and executive teams. Available at https://www.mckinsey.com/business-functions/risk/our-insights/coronavirus-15-emerging-themes-for-boards-and-executive-teams (Accessed: 18 January 2021)

9. Organisation for Economic Co-operation and Development (2020) Social economy and the COVID-19 crisis: current and future roles. Available at http://www.oecd.org/coronavirus/policy-responses/social-economy-and-the-covid-19-crisis-current-and-future-roles-f904b89f/ (Accessed: 18 January 2021)

10. PWC (2020) COVID-19 Collaboration Series - How business-led upskilling can reboot Australia. Available at https://www.pwc.com.au/about-us/insights/non-executive-directors/business-led-upskilling.html (Accessed: 18 January 2021)

11. World Economic Forum (2020) Integrated corporate governance: 6 leadership priorities for boards after the COVID-19 crisis. Available at https://www.weforum.org/agenda/2020/06/integrated-corporate-governance-6-leadership-priorities-for-corporate-boards-after-the-covid-19-crisis (Accessed: 18 January 2021)

 

 

Discussing Corporate Governance During a Pandemic

 

Image source: https://diligent.com

Overview

The study of corporate governance has become a burgeoning field over the last decade and has sparked substantial interest in international comparisons. Early comparisons divided the world into two broad dichotomous systems: the Anglo-American corporate governance system, which is characterized by short-term equity finance, dispersed ownership, strong shareholder rights, active markets for capital control, and flexible labour markets; and the Continental European corporate governance system, which is characterized by long-term debt financing, concentrated block holder ownership, weak shareholder rights, inactive markets for capital control and rigid labour markets (Becht et al & Roell, 1999; Hall & Soskice, 2001; La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 1998; Shleifer & Vishny, 1997) 

Corporate governance in today’s business setting cannot be ignored. Several businesses may focus on self-governing boards. However, some have adopted different methods of governance. E.g.  Terms of office or annual elections. It can be said the no two organizations are the same. Similarly, corporate governance policies may vary within several organizations. Corporate governance influences many facets of a business, these range from communication, leadership and strategic decisions. However, corporate governance mainly encompasses a board of directors and how they govern the business.

 

Corporate Governance

It has been stated that Corporate governance is influenced by multiple, functionally interrelated sets of institutions. The resulting clusters or configurations of institutions are more complex than simple bipolar models of corporate governance such as shareholder versus stakeholder, market versus bank, or outsider versus insider (Aguilera & Jackson, 2003). 

Additionally, it is noted that Corporate Governance refers to the way in which companies are governed and to what purpose. It identifies who has power and accountability, and who makes decisions. It is, in essence, a toolkit that enables management and the board to deal more effectively with the challenges of running a company. Corporate governance ensures that businesses have appropriate decision-making processes and controls in place so that the interests of all stakeholders (shareholders, employees, suppliers, customers and the community) are balanced. TCGI (2020) 

Furthermore, Governance at a corporate level includes the processes through which a company’s objectives are set and pursued in the context of the social, regulatory and market environment. It is concerned with practices and procedures for trying to make sure that a company is run in such a way that it achieves its objectives, while ensuring that stakeholders can have confidence that their trust in that company is well founded. TCGI (2020) 

It has been discussed that there are four Ps of Corporate Governance. These are considered as guiding principles of governance how it functions. The four Ps of Corporate governance refer to all people involved. People who perform several functions to achieve required outcomes. The second P refers to purpose which simply means governance occurs for a purpose. The third P refers to the process by which the organization accomplishes its purpose. This purpose is established by examining the organization’s performance. The final P refers to Performance. Examining performance is key within an organization. The capacity to analyse information and applying the results to the business is a key purpose of the governance. 

It has been stated that Good Corporate Governance is an expression of quality management to maintain checks and balances within the organisation, to increase transparency and preventing corporate abuse and misconduct. Good Corporate Governance also understands the importance of investors of long-term, persistent operating performance and tends to be inherently performance driven. Dasaraju et al (2011)

  

Learnings

Corporate governance can be roughly classed as the study of authority within organizations and the impact over decision making in an organization. It can be concluded that Corporate governance should integrate several elements. 

A main feature of Corporate Governance is corporate compliance. Organizations should adhere to required regulations. These regulations mould the structure of an Organization’s Corporate Governance procedures before it commences operations. Corporate Governance  assists organizations in avoiding compromise with regards to integrity and meeting the welfares of stakeholders. 

It is agreed that the first impulse for sustainable corporate strategies stems from the board of directors. The presence of a leader who raises followers’ commitment to achieve the organizational mission and objectives. Winston (2006) This is a prerequisite to transfer the principles of sustainability into the goals and behaviors of the whole organization. This determines a governance approach directed towards the growth of sustainable value over time. Eccles (2012)

 

Corporate Governance during the Covid 19 Pandemic

It is said that the COVID-19 pandemic is not the first crisis that corporate directors have faced, but in terms of its complexity, scale, economic impact and continued uncertainty, it’s unprecedented. Between shattered supply chains and the volatile stock market, organizations have looked to corporate leaders for effective responses and solutions. Schindlinger (2020) 

However, a Harvard business review article has stated that since the onset of Covid-19, corporate boards have faced a string of difficult decisions. Take the question of dividend payments: Ordinarily, the decision would be a relatively straightforward matter of applying a stated dividend policy, following past practice, or choosing an amount based on shareholder expectations and the company’s earnings for the period. But this year, with Covid-19 decimating the economy and looming uncertainty about the depth and duration of the crisis, the decision became a complex matter of weighing and balancing multiple factors, at least for companies flush enough to consider it at all. Paine (2020) 

Additionally, it has been stated that the pandemic and resulting shutdowns have made the complexity and interconnectedness of the global economy more obvious and tangible than ever before. For example, prior to the pandemic, roughly half of the world’s supply of N95 facial masks – life-saving equipment required by every health care worker fighting the virus – was being produced in China, which came to a halt as the country had to shut down factories to help slow the spread of the virus. The resulting shortage prompted companies in industries as varied as automotive and pet suppliers to begin producing masks. In our interviews, directors reflected on how this experience has demonstrated that there are no truly “local businesses” anymore; every enterprise, regardless of size, has been impacted profoundly by this global event. Schindlinger (2020) 

Furthermore, it is sated by Schindlinger that while the shift was sudden and dramatic, the move toward modern governance, which is hallmarked by agility in corporate leadership, has been gaining momentum over the last decade. Corporate directors leverage a variety of technologies, proactively seek data and insights and have more nimble communication and collaboration practices. Their governance practices and decision-making include a broader and more diverse group of stakeholders, with a more global set of perspectives. So, while this crisis was unprecedented, many of the directors we interviewed found they were at least somewhat prepared to respond to the pandemic and were able to stay nimble and adapt rapidly as the situation evolved. Schindlinger (2020) 

 

Conclusion

The essence of corporate governance comes down to the associations between management and shareholders and auditors all playing their part. Shareholders strive for maximum benefits. They require that management governs and achieves profitability without compensating themselves at the expense of shareholders.

Additionally, auditors ought to be relieved of any unwarranted influence by management. It is empirical that the welfare of all stakeholders is well-balanced. Good corporate governance is intended to bring in the highest return on investments and to preserve the organization’s affairs.

Feedback from you the readers. We want to hear from you.

Why should corporate governance be relevant to you?

References

Becht, M., & Roell, A. (1999) Blockholdings in Europe: An international comparison. European Economic Review, 43, pp. 1049–1056

Dasaraju H, Murthy L, Kota S (2011) Corporate Governance Mechanism and Issues In Emerging Economies A Case of India In Global Scenario, IJMBS Vol 1 Issue 3

Eccles, R. Miller, K. & Serafeim, G. (2012) How to become a sustainable company. MIT Sloan Managing. Rev., 53, pp. 43–50 

Hall, P.A., & Soskice, D.W. (2001) ‘Varieties of capitalism: The institutional foundations of comparative advantage’. Oxford: Oxford University Press.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R.W. (1998). Law and finance. Journal of Political Economy, 106(6), 1113–1155.

Paine S. L (2020) Covid-19 Is Rewriting the Rules of Corporate Governance

https://hbr.org/2020/10/covid-19-is-rewriting-the-rules-of-corporate-governance

(Accessed: 15 October 2020)

Price, N J (2017) Importance of Corporate Governance in an Organization https://insights.diligent.com/corporate-governance/importance-of-corporate-governance-in-an-organization

(Accessed: 10 October 2020)

Schindlinger, D (2020) How Does Corporate Governance Change in a Crisis https://www.corporatecomplianceinsights.com/corporate-governance-change-crisis/

(Accessed: 10 October 2020)

Shleifer, A., & Vishny, R.W. (1997) ‘A survey of corporate governance’. Journal of Finance, pp. 737–783.

The Chartered Governance Institute (2020)

https://www.icsa.org.uk/about-us/policy/what-is-corporate-governance

(Accessed: 10 October 2020)

Winston, B.E. and Patterson, K. (2006) An Integrative Definition of leadership. Int. J. Leadership Study, pp 6–66.