Take-Aways for Boards of Directors from the COVID-19 Pandemic
The COVID-19 pandemic has tested businesses’ ability to respond to a crisis and deal with internal and external consequences. Many boards have effectively overseen companies through these extraordinary circumstances, guiding and adapting crisis management plans. Additionally, communications and transparency between boards, management, shareholders, and employees have been tested.
Retirement Ages for Board Members
Although the United States generally does not mandate retirement at a certain age, specific industries and occupations have such requirements, including for airline pilots. Statistics show that 63% of workers retire between the ages of 57 and 66, with 62 as the minimum age to collect social security.
The Pandemic & the Format of Annual Meetings
The necessity of having virtual shareholder meetings this past proxy season due to the COVID-19 pandemic has further questioned the necessity of the in-person annual meeting.
A Key, Sometimes Overlooked Committee: The Governance Committee
A board of directors typically appoints a governance committee responsible for recruitment, onboarding, training, and director assessments. This committee may have responsibilities for compliance, risk, conflict matters, and other topics, too. The governance committee...
The Delaware Chancery, Supreme Courts, and Their Importance
Rulings from the Delaware Court of Chancery and the Delaware Supreme Court have become the foundation for corporate law and a critical guide for corporate governance. Over one million businesses today list Delaware as their legal home, including roughly two-thirds of the Fortune 500. It has been the principal state where businesses have registered since the early 1900s.
The Compensation Committee of a Board of Directors
Oversight of management is one of the board of director’s primary responsibilities. This includes hiring, monitoring, evaluating, and compensating the senior team. Most boards establish a compensation committee to be responsible for this important topic. Often, the committee retains an independent compensation consulting firm for advice.
The Importance of the Audit Committee
Effective governance includes a board of director’s ability to play a role in helping to maximize long-term shareholder value. In general, a board’s primary responsibilities are to oversee management, strategy, and financial reporting and compliance.
Environmental, Social, and Governance Issues
Environmental, social, and governance (ESG) are three related pillars of criteria used to assess a company through the lenses of ethics and sustainability. The term was first coined in a 2005 study examining these three criteria as value drivers for a business. ESG factors are increasingly considered in investment and governance decisions and span a full spectrum of issues not traditionally part of financial analysis but that may very well have financial relevance. While so-called ESG investments total tens of billions of dollars, this understates ESG’s impact, as institutional investors such as BlackRock are increasingly demanding enhanced actions and reporting on ESG topics.
The Board and a Corporate Crisis
In its capacity as a fiduciary for shareholders that oversees a company, a board of directors should be prepared to effectively oversee the response to an extraordinary circumstance or crisis that can potentially very negatively impact a business. Crisis management can differ depending on the event in question. Regardless, a detailed crisis management plan developed by management and approved by the board should be “on the shelf” and “rehearsed” to address such value-threatening and potentially life-threatening situations.
A Board of Directors Should Evolve as a Company Does
Governance is critical for companies of every size. The maturity of a company can impact the scope and detail of a board of directors’ responsibilities. A board should grow and evolve with a business. For smaller businesses, the board is often involved in specific decisions, especially if the CEO is a first-time leader of a company, as opposed to the more typical oversight role in larger companies.