The COVID-19 pandemic has precipitated massive changes in how companies do business, how their employees perform their jobs, and how board governance is carried out amid tremendous uncertainty and even chaos. As many boards experienced, when COVID-19 struck, meetings increased in number from four to six per year to as often as every two weeks. In fact, early in the crisis, it was not uncommon to have daily board calls. In addition, many CEOs reached out to individual board members for advice.
While the frequency of meetings rose dramatically, stay-at-home orders prohibiting gathering in-person necessitated that boards use remote technology. Just as senior leaders and other teams within companies meet by videoconference, so do boards. This necessity, however, has become a surprise upside of the pandemic: good governance can be accomplished — and even enhanced — using remote technology.
Moving forward, companies and boards have a real opportunity to leverage the efficiencies of remote meetings to help them recruit new and diverse board members, particularly those who are younger, are in earlier stages of leadership, and/or have family responsibilities that might otherwise preclude board service. Indeed, what works well during the crisis may hold the key for pursuing greater board diversity and inclusion by attracting a broader slate of director candidates.
The pandemic response
Earlier this year, as COVID-19 spread around the globe, boards were in frequent contact with each other and with senior management because of the fluidity of crisis. Little was known about the spread of the disease, the impact on people's lives, the economic fallout and how each company should respond. Specifically, many boards have been helping senior management maintain a delicate balance between managing for the short term and the long term. Board members' fiduciary responsibility to ensure that both are addressed, however, given the amount of change and uncertainty caused by the pandemic, perspective these days has skewed toward the immediate and short-term. In fact, it is now more common for boards and management to view the long term as five to six months, as opposed to the usual three to five years.
Technology advances for better meetings
Rather than holding telephonic meetings, boards have turned to videoconferencing. Unlike the technology many of us experienced 10 or 15 years ago, with glitches, delays, and “frozen” screens, today's videoconferencing is almost seamless. The combination of real-time audio and visuals replicates the feeling of being in the room together. People are seen and heard which encourages discussion, enables for presentations to be made and viewed, and discourages multitasking that can become a temptation with a telephone call.
As someone who currently serves on 10 boards — three publicly traded companies (Leidos, Option Care, and Dentsply Sirona), three private for-profit companies, and four nonprofit boards — and as the chair of three of those boards (Option Care, Alcami, and Performance Health), I firmly believe that virtual board meetings are just as effective as being in person. In fact, there is evidence that, in some cases, virtual board meetings may have some advantages over in-person sessions beyond the convenience of being at home or avoiding travel. As two experts on boards wrote in Harvard Business Review, “Aside from the obvious benefits of reduced travel and increased attendance, shifting to virtual has allowed boards to improve governance and collaboration through shorter agendas, crisper presentations, more inclusive and bolder conversations, and broader exposure to key executives and outside experts.”
Based on this experience during the crisis, I believe that, after the pandemic, companies will be able to use remote technology for board meetings to improve governance. For example, I know of companies that are considering reducing the number of in-person board meetings from six per year to two. I do not believe that board meetings should be 100% virtual as that would completely negate the benefits of spending time in person with the management team and of having meals together as a board. The value of in-person interactions should not be underestimated.
However, conducting four board meetings a year remotely and holding only two in person would translate into a 66% reduction in travel (both time and cost). The reduced time commitment would also avoid the “opportunity cost” on directors who are unable to engage in other meetings, business activities, or personal/family time because of travel for board meetings. Greater time efficiency, alone, could make outside board service more practical and attractive for executives with jobs that demand much of their time as they build their careers. In turn, this could help with the recruitment of diverse candidates to make boards more inclusive.
Using remote meetings to increase board diversity and inclusion
To respond to the pandemic, companies need board members with varied points of view, reflecting diversity in all forms — gender, race, ethnicity, age, geographic region, industry background, and experience. As another recent Harvard Business Review article observed, “Now, as companies seek to navigate numerous issues few have faced before, including a worldwide pandemic, a lingering trade war, changing consumer demands, and widespread protests regarding racial inequality, even more may be seeking to increase their diversity.”
In addition, the average age of board members has been increasing; for S&P 500 companies, directors' average age is 63.5 years. Given the need for greater diversity in perspectives and experience, including the role of advanced technology, companies are finding it advantageous to recruit younger board members from the ranks of rising executives who have not yet reached the CEO level. Yet, for these executives, service on an outside board may seem to be an impossible load, given their personal and professional responsibilities. In addition, few publicly traded companies let a new CEO serve on more than one outside board because of the time commitment.
This is completely understandable. I can attest that it's not uncommon for 10 hours of committee meetings and board meetings to consume as much as two-and-a-half days when accounting for travel and board lunches and dinners. When international travel is involved, the time burden becomes even greater. As a result, it is often difficult for global companies that increasingly want to recruit board members from their major markets — whether a U.S. company seeking directors from Europe and Asia, or a European or Asian company having more North American board members.
An increase in remote boards meetings could allow more candidates, including sitting CEOs and other high-profile executives, to serve on more than one outside board. For a new CEO or an executive being groomed for that position, the benefits include increased experience with board governance and an opportunity to learn from other companies that are facing similar challenges and opportunities. The flexibility of remote meetings could help recruit directors in earlier stages of their careers and who have diverse backgrounds that bring first-hand knowledge and perspective of cultures, regions, and demographics, as well as a knowledge of technology that is common among the “digital natives.”
As we have experienced through the pandemic, remote technology can facilitate robust and meaningful discussions among board members and with senior leaders. Going forward, by leveraging the efficiency of remote technology, we can use the time savings from eliminating much of the travel involved to appeal to a broader slate of more diverse board candidates. This is a crucial consideration for board recruitment and succession. Given the amount of uncertainty that companies face in the near-term and as we look to the future, such breadth of perspectives and experiences will be invaluable — and remote technology may help us get there.
Harry Kraemer sits on three public boards (Leidos, Option Care, and Dentsply Sirona) in addition to private and nonprofit boards, is author of Your 168: Finding Purpose and Satisfaction in a Values-Based Life, a professor at Kellogg School of Management and former CEO of Baxter International, Inc.