Pandemic Turns Board Members Into Crisis Managers

(Bloomberg Opinion) -- Suppose, just suppose, you’re a director at a couple of Fortune 500 companies. It used to be a pretty easy gig, but with the coronavirus crisis, it has become as difficult as anything you’ve ever done. Based on interviews with a half-dozen directors and experts, here’s what I imagine is going through the mind of a typical corporate director:

Let me tell you: This is not what I signed up for.

Joining a few corporate boards seemed like a good idea at the time. You know the drill. You retire after a decade of being a pretty successful CEO, and you don’t want to spend every day on the golf course. So when a good company calls and asks you to join its board, you say sure. It keeps you in the loop, puts a little money in your pockets (not that I needed it with the retirement package I negotiated) and lets you feel as if you’re doing something productive.

But then — bam! — this coronavirus hit, and everything was suddenly different. Virtual board meetings a couple of times a week instead of in-person meetings once a quarter. And they’re not like the meetings we used to have. No one’s telling any jokes. We’re not letting the CEO drone on. All the numbers she used to throw at us — same store sales versus last quarter, blah blah — who cares? That’s not even fifth on the list of priorities. We’re asking lots of questions, different questions than we ever asked before. And we’re demanding speedy answers. Can’t afford to waste time. Too much at stake.

Of course, we asked about succession right away. Not her succession; we dealt with that years ago, like every decent board. The world may not know who would take over as CEO if she got Covid-19, but we know. It’s in the envelope in the desk, as they say. But what about the head of our Asia operation, or the chief marketing officer, or any of the 40 or 50 most critical jobs? She said she has someone in mind for most of those jobs. Not good enough, we told her. We need to have a protocol in place for each of those positions, and we need to know who is next in line. She gave us the names two days later.

Are we struggling with disclosure? Of course we are — what board isn’t? Some situations are easy to figure out. Altria Group Inc. disclosed pretty quickly that its CEO, Howard Willard, had come down with Covid-19. The guy was really out of commission — he was in the hospital for a while — and the chief financial officer, Billy Gifford, had to take over. Morgan Stanley never disclosed that its head man, James Gorman, had the virus until he sent a video to employees after he had recovered. Can’t argue with that, either. If you remain healthy enough to run the company — and Gorman did — then there’s really no need to disclose.

We’re not sure what we’ll disclose if she comes down with Covid-19; we’ll just have to make the call if and when it happens. I’ll tell you one thing: We aren’t going to act like Biogen. Dozens of executives have Covid-19, including two of their top people. But Biogen won’t say who they are, nor will it say whether CEO Michel Vounatsos is one of them. Everyone on my boards agrees that that is not the way to operate at a moment like this.

I’ve laid off people over the years whenever there’s been a business downturn, like after 9/11 or the 2008 financial crisis. It’s not pleasant, and you feel bad for the people you’re letting go, but you do it because you need to maintain profitability.

But I’ve never seen boards and managements react to the possibility of layoffs as they’re doing now. They are genuinely anguished at the prospect. My companies are taking care of employees, even if means profits have to take a hit. Even though our job as board members is to look out for shareholders, we’re fine with management putting employees first. This is hardly the time to “maximize shareholder value.” We’ve acquired PPEs for our factory workers, and we’re telling our office workers to work from home. We’ve set up wellness and mental health resources because those are big issues for employees. We can already see that mental health is going to be a serious issue.

One of my companies had to furlough people in a division where business had dried up, but it’s still supplying health insurance. My other company, the one with the plastics division, decided to divert some of its employees to make shields for hospital workers. It not only keeps them busy but gives them a true sense of pride that they’re helping the country fight the coronavirus. In fact, it gives all of us pride. There is a sense of purpose right now that is more powerful than anything I’ve ever seen before.

We board members had talked among ourselves about asking the top executive to take pay cuts. But you know what? Management beat us to it. They told us that all the top executives were going to take a 15% pay cut —and that they would cut their pay further if they needed to.

Partly it’s symbolic — they want to show they are willing to make some sacrifices. But also, the single most important thing right now is preserving cash. Nobody knows how long this is going to last. The uncertainty is almost unbearable. The more cash we have in the bank — and the less debt — the better chance we have of coming out of this in decent shape. Liquidity is the core business issue. Nothing else comes close.

We agreed with management that all capital spending had to stop. We’re minimizing vendor relationships. Freezing all hiring. But we are also asking management to look past the next three months. What’s plan B if it lasts, say, six months? Or Plan C or D if it lasts a year or more? Will we have to become a smaller company? A different company? Will we have to merge with a competitor? Or a company with a different line of business? We can’t just fly blind, regardless of the uncertainty. Despite all the issues they’re facing in the here and now, management has to start thinking about the future.

Couple of other things: There are going to be government bailout loans that we’ll be eligible for. We’ve got to decide whether it makes sense to take one or not. Stock buybacks are dead for now, so we can certainly live with that restriction, but we’re not very excited about giving the federal government an equity stake. I guess it’s going to come down to how badly we need the loan. My fondest hope is that we’ll be able to hoard enough cash — and generate cash with the divisions that are still doing well — to avoid taking the federal loan. But if we have to, we will. We’re not going to cut off our nose to spite our face.

We’re also still struggling with trying to figure out how to measure success in 2020. Earnings per share has become meaningless. Is success simply surviving? Retaining X number of employees? Holding onto core businesses? I don’t know. None of us on the board has a good answer. It’s something we’ll be talking about for most of this year.

All I know is we have to get through this. For us board members, that means being focused in ways that we never are except in times of crisis. Which of course is exactly what this is — the worst crisis I’ve ever seen. After it’s over, I’m retiring for good.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."

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