C-Suite, Boardrooms Will Look Different as Businesses Reopen

C-suites and boardrooms are going to look quite different as company leaders try to prioritize safety without sacrificing involvement as they resume some semblance of normal operations.

Bloomberg Law asked Hannah Orowitz, managing director on the corporate governance advisory team of shareholder engagement and governance consultancy Georgeson LLC, what pandemic-related corporate governance issues executives and directors need to consider.

Bloomberg Law: Should boards avoid meeting in person for the time being?

Hannah Orowitz: The use of virtual meetings in the shareholder meeting context this season has been the safe and healthy option for participation for everybody. And in the current environment, that holds true for board meetings as well, particularly because board members are often far flung. The travel logistics of them getting to a board meeting, as well as the issues with contact tracing, could exacerbate the situation.

For the foreseeable future, boards probably need to take all necessary precautions in order to continue prioritizing their health and safety, and the health and safety of their management teams. That probably does mean avoiding in-person meetings. As with shareholder meetings, it’s possible that you end up with some version of a hybrid meeting, particularly if you have directors or management team members with extenuating health conditions that make in-person participation difficult.

BL: Are there any legal questions that need answering before holding virtual-only board meetings?

Orowitz: It would be a state law consideration. You’d have to check with your state of incorporation whether virtual participation and decision-making is allowed. That’s probably where a lot of companies need to look, the decision-making aspect of that. Check the language in your organizational documents as well.

Beyond the state corporate law requirements, one complicating factor would be where companies may be incorporated outside the U.S. at the parent or subsidiary level. There are likely to be some additional challenges for those companies to think through, as there are often restrictions on where decision making can occur to avoid adverse tax consequences.

BL: What changes to board and C-suite structure and function are most likely to result from the current health crisis?

HO: Returning to work is going to be far more complex than the rapid exit that we all made from our offices. Companies probably had continuity plans in different states of readiness.

For those that had intact plans, executives and board members are going to need to continue to prioritize frequent updates to those plans. That’s something that probably wasn’t particularly high on the list before. You could also see some changes to function in terms of the responsibility for the business continuity plan decisions—more C-suite ownership of continuity planning. Another item of note is human capital management. The pandemic might elevate the scope of that topic within the C-suite and for the board.

Given the rapid and evolving nature of the pandemic, boards have been needing to meet much more frequently in most cases. And because of that the need for special committees is likely to increase, particularly for companies with several directors who sit on multiple boards. You need to identify who has the expertise and the capacity for rapid decision making.

BL: Is there now an incentive for companies to spend more on chartering private planes for executive travel? Could executive travel be viewed differently than before the pandemic?

HO: Looking at that from a governance lens, it’s a perk that has gotten a lot of scrutiny in the past. Given the health and safety considerations right now, I think it’s something that we could see reemerge—for understandable reasons in the short term. But I would expect if there are changes here that it would be temporary and something that investors are only likely to tolerate for the time period necessary to address pandemic-related concerns.

BL: Could we see changes to typical C-suite geographies, and might companies consider spreading executives across different corporate locations? Should executives stay virtual even as other employees as returning to the office?

HO: I can see that being something to consider. There are probably pros and cons, both currently in the crisis and as it subsides, to having everyone in one location rather than in multiple locations. There may be changes that we see there, but it would be very much dependent on the facts and circumstances of each company.

In terms of executives staying remote while employees go back, a tricky thing that companies will need to think carefully about is the culture and tone implications of them making different exceptions for leadership than they would for the broader employee population.

BL: As a former in-house counsel, what issues do you think should be top of mind for general counsels when they’re looking at strategies for operating during and immediately after the pandemic?

HO: Labor relations and labor management is much more in the spotlight now for a lot of companies. As a result, there are probably heightened reputational considerations stemming from the decisions being made there. So I would keep that in mind.

Obviously health and safety is going to be a priority. What that looks like is going to be industry specific. But I would say that perhaps there is going to be some helpful collaborative guidance that companies could get from leveraging industry organizational partnerships and things like that.

Also consider the logistics of asking employees to return to work, to the extent they are in areas where there isn’t adequate food supply or there’s no child care available yet. Those issues are going to need to be thought of very carefully.

BL: How might the pandemic complicate or change the traditional role of in-house counsel?

HO: The in-house counsel role is something that, in my opinion, is always evolving and adapting. Part of that role is being a problem solver and a consensus-builder within your organization. Those are skills that are going to be needed now more than ever.

One universally complicated factor for in-house counsel is what topics require board oversight and are ripe for inclusion on board committee agendas. That’s something that’s going to be expanding in the short term, and it’s going to require some additional thinking, problem solving, and time.

This interview has been edited for brevity and clarity.