NACD Survey: Directors Recognize COVID-19 Disruption, Have Confidence in Management

March 20, 2020

Directors are digging into the risks and management response to the COVID-19 pandemic that has now taken root in the U.S.

While new cases are dwindling in China, where the novel coronavirus originated, health officials say the worst is yet to come here. “Social distancing,” the practice of staying away from others, has hit Wall Street and Main Street hard in equal measure and the economic results will be far-reaching.

During this time, companies have been forced to address employee safety, supply chain concerns and stockholder losses. This week the National Association of Corporate Directors (NACD) surveyed nearly 200 directors for a “pulse survey” on how boards are reacting to the disruption.

Some of the key findings:

Boards are proactively engaging with management to address the COVID-19 response. Three of four directors (76%) report that their boards have discussed COVID-19 with management. About half (49%) report that they have reviewed internal corporate communications strategies and slightly fewer (42%) have worked to establish expectations for board/management communications. Further, 45% of boards are pressure testing management’s assumptions about the business impact of the virus.

Organizations are putting their people first. Many companies have started to rigorously assess the impact of employee and business exposure to the virus (74%). Most have reviewed the Centers for Disease Control and Prevention’s (CDC) guidance for employers (64%) and have developed internal communications strategies (66%) to keep employees up to date on evolving plans. Further, two-thirds (67%) of directors indicate that at their next board meetings, they intend to evaluate the effectiveness of management’s plans to protect the health and welfare of the employee population.

Directors are comfortable with the effectiveness of management’s crisis response at this moment. Directors generally give their organizations high marks for their initial crisis response and collaboration with the board. Seventy-four percent report that their board gets sufficient information from management, and 71% find management’s response so far to be effective.

Many anticipate a near-term business impact. In the NACD poll, most directors saw the largest, likely disruption in decreasing demand for their products (28%), followed by declining employee productivity (19%), breakdown in their supply chain (16%) and a meltdown in the capital markets (14%).

Directors are just beginning to focus on the longer-term implications of the crisis. Just 14% of respondents report reviewing risk-transfer options that management might have at their disposal, such as insurance coverage on property, supply chains or business continuity. Thirteen percent report already deciding to postpone a major 2020 investment. Further, 16% report discussing post-crisis plans with management. 

To help directors navigate the impact of COVID-19, NACD has also launched a publicly available resource center.