Ecoda’s webinars | summary of the main discussions*
1. Ethics remain a “driving force”
Companies with strong ethics have created a relationship of trust with their stakeholders on which they have been able to rely to demonstrate agility and adaptation in times of crisis.
Leaders must demonstrate integrity by showing emotional intelligence. They must be able to demonstrate that they continue to pursue a societal mission while making the decisions that are necessary for the company. They must be able to justify their decisions with a clear narrative in line with their values and their corporate purpose.
The role of the board of directors is crucial in defining the main relevant stakeholders, in understanding their expectations and defining the characteristics of the corporate culture
Boards’ composition is also crucial. More than ever, board members are needed who can challenge decisions and avoid cognitive bias when making decisions
To conclude, in times of crisis, displaying transparent decision-making and an authentic narrative is crucial to benefit from a good reputation and trust from the public.
2. Crisis management and risk control: How board performance will be judged?
Board members need to operate as the sounding board whenever necessary, to discuss pro-actively potential response plans, and to get much more hands-on governance.
The Covid crisis operates as a catalyst of existing trends. All new trends point to more attention for stakeholder governance, going far beyond the traditional shareholder governance model. Greater expectations are expressed towards the societal role of the business world, with clearer accountability rules and critical monitoring of a responsible business world. Board members are there to be “the radar of the future”
However, submitting to the exercise of defining the purpose of the business is not an end in itself. It is also necessary to understand the consequences the exercise has on the manner of evaluating performance and on the perilous exercise which is incumbent on the directors to arbitrate divergent interests
Board members must be able to think differently and to get prepared for the next crisis, for the unexpected it will only be possible if board members’ diversity is enhanced.
3. Has the COVID-19 crisis already set the direction for future supply chains – to be more local and less depending? Is this the beginning of deglobalization as a strategy?
We need to analyze long term trends like the ESG issues or sustainability which will necessarily impact the way in which their business is driven. The new societal paradigm requires companies to find new business models with more resilient supply chains. What is the most critical today is to invest in the long term rather than maximising the short term profit. Whatever happens, businesses are unlikely to return to unique value chains. They must put value chains back at the heart of their strategy and their quest for authenticity.
4. Dialogue between directors and stakeholders in times of crisis
The ability of the Board Chair and the CEO to coordinate and act in good intelligence is a real asset. Digitalisation will impact the board discussions and facilitate discussions.
Given that the crisis can exacerbate conflicts of interests among the different types of shareholders (retail investors vs institutional investors, active vs passive investors, 8 controlling shareholders vs minorities, etc), it is important for boards not to distinguish among them and to keep the same level of involvement
It is time to move towards a model of « company primacy » and to integrate a multi-stakeholder perspective. Stewardship codes are already involving in that direction by requesting a stronger duty of care from investors. Stewardship codes could go further by promoting collective responsibility.
*: Notes from the various webinars organised in May, June 2020