Key Issues for Directors Relating to COVID-19
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March 23, 2020 | Wachtell, Lipton, Rosen & Katz
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Thanks to Martin Lipton, David Katz and David Shapiro
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As the world reacts to the COVID-19 pandemic, directors on corporate boards play a vital role in navigating the path forward. Key issues facing corporate directors include:
- Maintaining close contact with the CEO and working with management to ensure the safety and well-being of the company’s employees and other stakeholders as well as the public at large.
- Understanding the risks to the company and its stakeholders from the COVID-19 pandemic, and discussing, as a board, management’s strategies for minimizing and mitigating these risks.
- Reviewing the viability of the enterprise from a short-term and long-term perspective and making appropriate changes to the corporate strategy to ensure that viability.
- Receiving a board-level briefing on company indebtedness, including bank and bond financings, lines of credit, availability of revolvers, key covenant terms and, in conjunction with that briefing, understanding the company’s near-term liquidity needs and working with management to secure liquidity needs.
- Appropriately messaging the company’s actions with respect to the crisis and providing the CEO and management with assistance in handling communication with internal and external constituents.
- Communicating frequently with, and seeking guidance from, applicable regulators and other government agencies with oversight.
- Responding to activist attacks and other actions by those seeking to take advantage of the situation and promote their own agenda.
- Evaluating opportunities for transactions that are made available by the changed circumstances.
- Working with management in engaging shareholders and other stakeholders on corporate operations, impact to strategy, and other important concerns, including ESG issues such as climate change and sustainability.
- Reviewing compensation plans and considering whether changes are required, particularly with respect to equity arrangements, unforeseen employee cash needs and mission-critical personnel.
- Evaluating the company’s current and future dividend and buyback policy as well as capital allocation and liquidity generally.
- Maintaining respect among board members and promoting effective decision-making through stressed and stressful conditions.
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