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The Covid-19 pandemic crisis has already had a massive impact on every company all over the world. As an executive coach who has worked with CEOs from startups to Fortune 500 companies as well as with boards of directors, I’ve been helping my clients to adapt to this changing environment. The role of boards has changed dramatically in this short time, and my conversations with directors have covered a lot of territory. I’ve seen a number of academic articles on the role of the board right now. I thought it would be enlightening to talk about this with a number of directors from diverse industries to get their view on how they view their leadership during this time. I spoke to a number of board directors and advisors about the role of the board during this time and what suggestions they have for boards right now. Their answers are below.
The Trump administration said on Wednesday that it would block Chinese passenger airlines from flying into or out of the United States starting on June 16 in response to a similar ban by the Chinese government on American companies, further escalating tensions between the world’s two biggest economies. Relations between the countries have deteriorated sharply in recent weeks as officials scuffled over the origin of the pandemic and China’s move to tighten its authority over Hong Kong, a semiautonomous city. With the election just five months away, President Trump and his campaign have taken a much tougher stand against China, blaming its government for allowing the coronavirus to turn into a pandemic and wreck the American economy. The aviation dispute threatens to further chill economic relations and disrupt business ties between the United States and China. Flights between the countries were already sharply curtailed by the pandemic and Chinese restrictions on foreign airlines that effectively halted trips by United Airlines, Delta Air Lines and American Airlines, the major U.S. carriers that go there.
Everyday investors may soon be able to get a piece of private equity action. The Department of Labor on Wednesday issued a letter that clarifies how, under existing rules, certain retirement plan sponsors, including 401(k)’s, can put money into private equity investments that are usually reserved for the super rich and big institutional investors. Labor Secretary Eugene Scalia said the new guidance “helps level the playing field for ordinary investors and is another step by the department to ensure that ordinary people investing for retirement have the opportunities they need for a secure retirement.” But it’s unclear how quickly the managers of big retirement plans will embrace private-equity investments. Vanguard, one of the largest managers of 401(k) plans in the country, declined to comment on the letter. Another major manager, Fidelity, did not respond to a request for comment.
Analysts believe Air Canada may be looking for an escape hatch to exit its proposed $720-million acquisition of Transat A.T. Inc., after coronavirus crushed the airline sector and dimmed prospects of passengers boarding planes with any frequency any time soon. Le Journal de Montreal reported Tuesday, citing three anonymous sources, that Air Canada wants the federal government to block the purchase as it awaits a final decision from Transport Minister Marc Garneau. Air Canada did not confirm or deny the media report. “At this point we are awaiting the outcome of ongoing regulatory reviews and so are unable to offer a comment,” Patrick Fitzgerald, an Air Canada spokesman, wrote in an email to the Financial Post. Transat declined to comment, but said on May 25 it expects the deal to close in the fourth quarter.
Given the weight of responsibility that rests on their shoulders, CEOs have long been depicted—at least when observed from a distance—in near-heroic terms. Before the pandemic, people generally assumed successful business leaders were rigid, impenetrable figures, who succeed by simply staring down external adversity. But CEOs are not superheroes. Even before pretty much every business on the planet was caught off-guard by the COVID-19 outbreak, it was clear that being un-disruptable in today’s challenging marketplace demands the ability to navigate constant turbulence and continuously adjust. In the Deloitte research paper “Can CEOs Be Un-Disruptable?” we articulated new models for leadership flexibility recommended by CEOs and board members we interviewed. This paper highlights an underutilized resource that CEOs can turn to for help. The resource in question is the corporate board. This may sound obvious. After all, directors come from an array of businesses with a variety of skills and experiences; they are there, in part, to help the CEO succeed. But as we learned while researching ways to make boards more strategic, not only do CEOs want to lean more heavily on their boards and involve them in a strategic role, but directors also seek more effective ways to provide the kind of input that will better guide the company’s strategy.
Insights and highlights from the survey include the following: (1) Expect more working from home, even one year after COVID-19 substantially subsides. 77 percent of HR executives expect an increase in the number of employees working remotely for at least three days per week. That’s even 12 months after the pandemic substantially subsides. “A shift toward more remote working will have major implications for HR departments,” said Robin Erickson, PhD, a report co-author and Principal Researcher at The Conference Board. “Among other changes, they will be able to recruit workers from a broader geographic pool and will need to hire and promote those who can inspire remote teams."Among the companies that were prepared for remote work, many are self-reporting an increase in productivity now, during the crisis.
(2) 37 percent of companies that had more remote workers before COVID-19 report that they are actually seeing increased employee productivity now, during the crisis. This self-reported boost in productivity suggests the immense potential of remote work – and the flexibility it provides – to improve performance and results.
It is the board’s responsibility to coach and advise its management team, especially when the terrain is trickier than usual. However, boards should not mistake the need for vigorous debate with the need for consensus. More than ever, a bias to action is essential, which will frequently mean getting comfortable with disagreement. Apart from all the operational focus needed for the return to work, it is even more important that boards and management teams take a step back to reflect upon these 15 core themes. In summary: (1) Take the time to recognize how the people who (directly or indirectly) depend on the company feel.
(2) Have aspirations about the post-COVID world, but build the resilience to make them a reality. (3) Strengthen your capability to engage and work with regulators and the government. (4) Watch out for non-COVID risks, and make sure to carve out time to dedicate to familiar risks that have never gone away. (5) Find out what went wrong, and answer the uncomfortable truths that investigation uncovers.
WASHINGTON — One of the biggest questions surrounding the government’s efforts to help businesses struggling amid the coronavirus pandemic is whether the programs are constructed in a way that will prevent a wave of bankruptcies, keeping a short-term shock from turning into drawn-out economic pain. A new analysis from a group of Harvard University researchers suggests that the answer, should markets turn ugly again, might be no. Highly indebted public companies that employ millions of people are largely left out of the major direct relief options that Congress, the Federal Reserve and the Treasury have devised to help companies make it through the pandemic. Much of that is by design. Policymakers have prioritized getting help to businesses that came into the coronavirus crisis in good health, lowering the chances that taxpayers will wind up bailing out big companies that loaded up on risky debt. It could also help officials avoid the kind of angry criticism that surrounded 2008 bank and auto company rescues.
Whilst the COVID-19 global pandemic (and the widely predicted economic downturn to follow) will inevitably require investors to be more creative in sourcing investments, there are some areas – such as minority investments in public companies at discounted values – which could provide a more readily available form of investment than has historically been the case. Recent developments in the UK public markets show encouraging signs for UK PIPE deals during the pandemic period. Private investments in public equity, often colloquially referred to as “PIPEs” – can take many forms, but typically involve an investor acquiring a non-controlling stake in a listed company through the issuance of convertible bonds or shares or listed ordinary shares (or a combination), at a discounted equity price to the current market. It enables the investor to be protected in a downside scenario whilst also being able to participate in the equity upside. The form of investment and the accompanying rights sought will be influenced by the investors’ strategy for wanting to participate in the PIPE and the issuer’s financial situation and capital structure.
We do not quarrel with the view that there is an important role for publicly traded business corporations in addressing serious domestic and global issues (call them ESG/stakeholder issues) – although, as the survival imperative priority many companies face today due to the COVID-19 pandemic underscores, whether, to what extent and how to participate in ESG/stakeholder support activities are subject to changes in objectives and circumstances rather than permanent corporate decisions. [...] At the same time, we believe it is critical – from the standpoint of guiding and protecting directors of public business corporations – to not let ESG/stakeholder objectives blur or undermine a clear-eyed vision by those directors of what their current responsibilities are, and to whom they are owed, under applicable law, which in Delaware and like-minded states continue to be grounded in their obligations as fiduciaries to shareholders. We believe that the corporate purpose formulation set forth above promotes that blurred vision risk as a core feature – by calling on directors to balance the interests of all stakeholders, including shareholders but without giving shareholders primacy status.
Companies today are under greater scrutiny than perhaps ever before. As a consequence there has been marked increase in the number of companies conducting their own internal investigations, caused by either a regulatory probe or by a business itself uncovering wrong doing. But if internal investigations are to please regulators, or form a solid basis for disciplinary action, they have to be robust. With little guidance available, that places companies at a disadvantage. [...] There is much to consider and the pitfalls are numerous for boards and company managers. But they can be avoided—and that’s important because regulatory authorities are watching. The Financial Conduct Authority has noted that watchdogs cannot “naively” accept a firm’s work and conclusions.
US public companies have needed to adjust their governance practices to respond to the unprecedented challenges of the COVID-19 pandemic. This report discusses how they have responded and provides insights for what’s ahead. The report is based on a survey conducted by The Conference Board, Debevoise & Plimpton, and Russell Reynolds Associates of general counsel, corporate secretaries, and investor relations officers at corporations registered with the US Securities and Exchange Commission (SEC). The survey, which launched on April 9 and closed on May 8, 2020, included 21 questions.
Before the pandemic shut down businesses, a robust economy had powered a building boom, sending office towers skyward in urban areas across the United States. The coronavirus outbreak, though, has scrambled plans and sent jitters through the real estate industry. Skyscrapers scheduled to open this year will remake skylines in cities like Milwaukee, Nashville and Salt Lake City. Office vacancy rates, following a decade-long trend, had shrunk to 9.7 percent at the end of the third quarter of 2019, compared with 13 percent in the third quarter of 2010, according to Deloitte. Developers were confident that the demand would remain strong. But the pandemic darkened the picture. “There is a pause occurring as companies more broadly consider their real estate needs,” said Jim Berry, Deloitte’s U.S. real estate sector leader.
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Alberta’s government-owned fund manager confirmed significant investment losses on Wednesday, adding fuel to a heated debate over Premier Jason Kenney’s plan to shift more of the province’s retirement savings into its care. The Alberta Investment Management Corp., known as AIMCo, took a 10.2 per cent loss in the first three months of the year on a $50-billion portfolio belonging to the largest of its 31 clients, a fund for health care and municipal workers called the Local Authorities Pension Plan, or LAPP. AIMCo also invests the Heritage Savings Trust Fund, a provincial war chest funded by royalties on oil and gas companies. This was the first public release of overall performance at AIMCo. The loss came when industry data show the median return for Canadian pension plans in this period, which includes the COVID-19 induced market sell off in late March, was a 7 per cent decline. Another AIMCo client, the $3-billion Special Forces Pension Plan for police officers, reported on Wednesday that their fund was down 12.2 per cent in the first quarter, compared with a 6.7 per cent decline in their benchmark. A significant portion of AIMCo’s decline reflected investments linked to market volatility. The Edmonton-based fund manager previously estimated it will lose a total of $2.1-billion on this strategy, on total assets of $119-billion. But figures released on Wednesday show the fund manager turned in poor results in stock, bonds, real estate and private equity.
(Reuters) - Former Enron CEO Jeffrey Skilling, released last year after a 14-year prison term stemming from the energy firm’s collapse, is raising funds to launch a digital marketplace catering to professional oil and gas investors, according to four people familiar with the matter. The venture, called Veld LLC, plans to profit by charging a fee for marketing stakes in operating oil and gas wells, one of the people said, and will offer analytical data to investors interested in the well stakes. Investors can acquire holdings in between one and 10 wells, which the presentation described as “pods,” and will be sold to the investors as high-yield investments, the people familiar with the business pitch said on the condition of anonymity. It was not clear how much Skilling is seeking to raise to launch Veld. He has been holding meetings with energy investment firms in recent months, the people said. [...] In 2006, Skilling was convicted of 19 counts of conspiracy, securities fraud, insider trading and lying to auditors for his part in the collapse of energy giant Enron, which imploded on the revelation of wide-spread accounting fraud and corruption. He resigned as CEO of Enron in 2001, months before it filed for bankruptcy.
French luxury goods group LVMH’s $16.2 billion takeover of Tiffany & Co is looking less certain as the jeweler grapples with a deteriorating situation in the U.S. market brought on by a global pandemic and severe social unrest, fashion trade publication WWD reported on Tuesday. Tiffany’s shares closed down nearly 9% after the news. LVMH’s board called a meeting in Paris on Tuesday night to discuss the matter, WWD reported, citing sources. LVMH’s board is concerned about the COVID-19 pandemic and protests linked to the death of George Floyd at the hands of Minneapolis police, according to the report. The French company’s board also voiced concerns about Tiffany’s ability to cover all its debt covenants at the end of the transaction, which was expected to be concluded mid-year, WWD reported.
May saw an increase in new campaigns compared to March and April; 16 campaigns and $3.3bn of capital deployed
− May's campaign initiations were double that of April, while capital deployed was 159% higher than March
− However, May activity was still below the monthly averages for the pre-COVID six month period ended in February 2020 with
respect to both campaigns initiated (~19) and capital deployed (~$4.6bn)
• Five campaigns in Japan drove much of the activity, continuing the recent trend of heightened APAC activity
− In 2020 YTD, 16 campaigns initiated in Japan, compared with an average of ~6 over the same period in 2017 – 2019
− Three of the Japanese campaigns initiated in May had a capital return thesis, compared with only one capital return-oriented
campaign initiated in the rest of the world in 2020 YTD
Uncommon Activists in Europe
On May 20, 2020, the U.S. Senate passed S. 945, the Holding Foreign Companies Accountable Act, by unanimous consent. The key effect of S. 945 is that it prohibits certain companies from listing and trading their securities on any U.S. securities exchanges or through any other method regulated by the U.S. Securities and Exchange Commission (SEC) if the Public Company Accounting Oversight Board (PCAOB) is prevented from reviewing the companies’ audits. After the bill passed, on the same day, a bill with the same language was introduced in the U.S. House of Representatives by Rep. Brad Sherman, D-Calif., chairman of the House Financial Services Committee’s subcommittee on Investor Protection, Entrepreneurship and Capital Markets. Significantly, Rep. Sherman’s subcommittee has jurisdiction over this bill in the House, which could increase the likelihood of its enactment.
Air taxis are coming. Until they can fly autonomously, this nascent industry will need many pilots. Flying cabs may smack of science fiction, if not of science fantasy. Yet many mobility experts envision a future of small, car-like vehicles that avoid the congested streets of our cities by zipping through the skies above them. More than 250 businesses of all forms and sizes are preparing to manufacture, build, or operate these air taxis in the next five years. These will mostly be multi-rotor or multi-winged electric vehicles that take off and land vertically, seat two to six passengers, and have a 30-to-300-mile range. While some might personally own such vehicles, we expect the vast majority to be operated in a shared fashion. When this urban air mobility (UAM) market reaches scale and its full potential, our latest estimates suggest, the global opportunity will be on the order of hundreds of billions of dollars a year.
SYDNEY, Australia — After months of locked-down borders, countries that have stifled the coronavirus are trying to choreograph a risky dance: how to bring back visitors without importing another burst of uncontrolled contagion. Estonia, Latvia and Lithuania dropped restrictions for each other on May 15, while keeping out everyone else. Australia and New Zealand are planning to revive unrestricted flights within their own “travel bubble,” which Fiji, Israel and Costa Rica are clamoring to join. In China, cities are fast-tracking corporate charter flights, though Beijing remains sealed off. In Cyprus, tourists can get in only if they carry health certificates proving they tested negative for Covid-19. International travel has always been a proxy for trust among nations and people, but the pandemic has poisoned the air. Now, relationships are being rebuilt under enormous economic pressure, with a wary eye on a pathogen that is not going away anytime soon.
[...] It may not be in a CEO’s job description to embrace and pontificate on political issues, but there are advantages to being aware of them. “A smart CEO with a smart board that is aware of the context within which they’re operating is sensitive to where their employees are, where the customers are, what they’re thinking of, what their priorities are,” said Rahul Bhardwaj, chief executive of the Institute of Corporate Directors. York University’s Leblanc, who advises boards, said the legislative changes have emboldened some corporate directors, particularly when it comes to asking questions about the response to COVID-19. “Management is getting some really tough questions,” he said. “I don’t think that would have happened but for the CBCA amendments.” Risks to reputation are now top of mind for many corporate directors, Leblanc added. And speaking up also means companies could have to walk the talk, as people will remember what they’ve said.
This publication provides an overview of the duties and responsibilities of boards in company groups across 45 jurisdictions. The introduction outlines the global landscape of company groups, their economic role and the principal challenges they present with respect to corporate governance polices. Part I develops a typology of legal and regulatory approaches that jurisdictions have taken to address these challenges. Part II highlights differences and commonalities across jurisdictions, especially as they relate to: how directors may take into account group interests; procedures for managing conflicts of interest; compensating losses incurred by a group company for the benefit of the group; transparency around group purposes and allocation of business opportunities; and allocation of responsibility for company policy and oversight between parent and subsidiary boards.
Increased leisure time is an important contributor to a higher standard of living for Canadians. Obviously, so is increased monetary income which allows Canadians to buy more goods and services. Higher real (inflation adjusted) workplace compensation is therefore obviously critical to allowing Canadians to enjoy more leisure time without suffering a decline in their material standards of living. [...] Specifically, if labour productivity growth averages 2 percent per year from 2018 to 2030, Canadian workers in 2030 could work a four-day work week year-round while enjoying a higher material standard of living than they enjoyed in 2018.
How realistic is it to aim for a 2 percent per year increase in labour productivity in Canada? It would about double the productivity growth rate experienced in recent years. However, since labour productivity in Canada’s business sector increased at around 2 percent a year from 1961 to 2012 the target is not unrealistic, and the goal of returning to the country’s long-run productivity growth performance deserves a prominent place on the policy agendas of the federal and provincial governments.
The number of private firms going public in the U.S. has declined significantly since 2000. A related phenomenon is that most private firms that “exit” (change ownership structures to allow early equity investors such as entrepreneurs and venture capitalists to cash out) choose to be acquired by another firm. In a new paper, we aim to provide insights into the above trends by empirically analyzing two related research questions using a comprehensive dataset on private firms from the U.S. Census Bureau. First, what explains the tremendous decline in IPOs in the U.S. since 2000? Second, what drives the dramatic shift toward acquisitions rather than IPOs in the case of exiting private firms since 2000?
The rest of the world should worry, too. The people of Hong Kong want two things: to choose how they are governed, and to be subject to the rule of law. The Chinese Communist Party finds both ideas so frightening that many expected it to send troops to crush last year’s vast protests in Hong Kong. Instead, it bided its time. Now, with the world distracted by covid-19 and mass protests difficult because of social distancing, it has chosen a quieter way to show who’s boss. That threatens a broader reckoning with the world—and not just over Hong Kong, but also over the South China Sea and Taiwan. On May 21st China declared, in effect, that Hong Kongers deemed to pose a threat to the party will become subject to the party’s wrath. A new security law, written in Beijing, will create still-to-be defined crimes of subversion and secession, terms used elsewhere in China to lock up dissidents, including Uighurs and Tibetans. Hong Kong will have no say in drafting the law, which will let China station its secret police there. The message is clear. Rule by fear is about to begin.
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