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For years, crisis planning for many public companies evolved from a static "check the box" task to a multifaceted priority requiring real discipline. Today, COVID-19's urgency brings the call to a boiling point—crisis response is now a primary focus of internal and external stakeholders alike. Corporate board directors, as one of these groups of stakeholders, are, or should be, an important part of the crisis management process. However, rarely a study has been devoted to understanding directors' perspectives about crisis-readiness in general, and, significantly, to improvements that they they would like their companies to make. In this article, we explore those issues.

Although the COVID-19 pandemic was nearly impossible to predict, many believed that a local, national, or global crisis was likely coming, and that companies were not ready for it  In a seminal 2018 National Association of Corporate Directors (NACD) poll, 19% of directors expressed confidence in their companies' management to address atypical, disruptive risks, but over 60% viewed those risks as "much more important" than five years prior.  While 81% of directors surveyed in a 2019 poll rated improved board preparedness for a corporate crisis as a moderate to very important priority, fewer than 25% had discussions with management in the preceding 12 months about the board's crisis roles and responsibilities, and less than 10% had participated in post-crisis assessments.

And yet, as S.E. Hinton once wrote, "That Was Then, This is Now." Today's crises, and the uncertainty of the path forward, requires general counsel and other corporate leaders to pay careful attention to the views of all critical stakeholders, including the board. The minefield is real:  precipitous unemployment, broken contracts, spiraling supply chain problems, and a close to unprecedented decline in consumer spending, among others. To navigate this field, it is paramount that corporate management and their boards are aligned.

Here, we explore how several prominent board directors think about crisis management today.  Our approach was simple:  we interviewed several experienced, independent directors who we long admired from Fortune 500 companies, some who served for several years as board chairs or lead independent directors, and others who had significant experience on their companies' audit, compensation and risk committees. Their companies span many industries—some highly-regulated and some not—including banking, pharmaceuticals, technology, telecommunications, management consulting, utilities, and apparel.  We interviewed them individually and applied Chatham House Rules. Our questions and their answers are outlined below.

Q: Does your company have a crisis management plan, and if so, has it helped your company weather the pandemic?

Almost every director believed that crisis management plans are not an option—they are a must. As one put it, the need for a plan is "obvious" because "you don't want to start from scratch in a crisis" and "time is of the essence.  Another noted that not only is the initial plan important but it "needs to be drilled often," it needs to be "updated," and "you have to modify it on those things that worked or didn't work."

When asked about preparing for a pandemic, directors reflected a shared view that planning for this type of specific crisis is difficult, but now is undoubtedly necessary. As one observed, until now, company management "may have planned for an epidemic"—a regional event—"but not a pandemic"—a global event. Another said, "[w]hat is happening today is far out of left field.  You realize how unprepared we are for this. It's not because we didn't do a good job—we focused on the known risks (employees, customers, etc.), prepared for a business unit being down, but not the whole thing. The magnitude of the impact is beyond anyone's preparation. The numbers are staggering." On the other hand, one expressed, "you can't prepare for this, but the impact is what you can prepare for. You go through scenarios all the time; all the what-ifs and their base case, adverse case, and severely adverse case. You need to know what you look like in all of those instances. While we wouldn't have planned for this, we have planned for things that would have the impact of this."

Directors also expressed concerns about a possible "crisis within a crisis." As companies devote so many resources to surviving the pandemic and the many changes it has forced them to make, some directors worry that their companies will not have enough resources to deal with another unexpected crisis. As one director compared it, "imagine if a terrorist attack took place in New York City right now. There are no hospital beds; police are getting sick. How do you plan for a crisis on top of a crisis?"

Q: Are your companies providing you and your fellow directors with enough information about crises when they first surface?  

Answers to this question varied. Some directors felt they received enough information, but some noted that this issue can be fraught with problems. One reflected "I don't really have concerns about the information we receive. In a crisis you can't get too much information. You want it in a deliberate and thoughtful fashion, but not a firehose. Sometimes you need three or four meetings a day about it until you have a good grasp on the situation." Another said, "information flow is the biggest impediment to crisis management. The speed at which things happen is often incredible; it's challenging. The board wants to make sure they know what's going on; they need to make sure advice is not only being sought, but heard." Still, one lamented "when you have the wrong CEO and the CEO is not transparent, this issue becomes a huge impediment. We fired one CEO because he wasn't transparent.  When he started getting in trouble, he didn't come to the board and get help. He wasn't hiding it necessarily, but it was subtle, and it broke down the trust." Another director put it simply: when boards do not get enough information, "they feel like they are window dressing."

Q: Are boards concerned about conflicts of interest involving company management involved in investigations?

Crises arising from company management itself or its conduct came up several times, fueled by news about investigations gone awry. It is clearly a focus, with some expressing stronger concerns than others. Reflecting on a recent, highly publicized, global regulatory investigation, one director's outside view was that "the general counsel took on an investigation that it was clear to all onlookers he should not have. The central allegations in the investigation were likely to lead to a critique of the culture that executive management established. But the GC was a member of the executive management team for years. He had a conflict. Because of that conflict, he had no credibility to do the investigation. Instead the investigation should have been conducted by the board, and the board should have known better."

Another director generally remarked: "it's tough. Senior management isn't going to like it. But depending on the level of the crisis investigation [an independent board investigation] might be needed. The GC, CEO and board have to understand that part of the GC's role is reporting to the board. If you have a good GC they should know when to separate and when to recuse. It is critical role."

This question led to a discussion about boards convening special litigation committees. One director explained, "when the interest of the company and the interest of the board may have diverged, you need a voice for each and consider how you are going to document the response. The board needs to be able to prove that it considered certain factors and courses of action. It can use business judgment to reject them, but you need to show you considered them." Another offered, "when you need a special committee, it will hopefully be led by someone new to the board so they don't have a history with the company, and are less biased."

Q: Once a crisis is over, are your companies good at studying the results and adopting lessons learned?

As we discussed in a previous article, the post-mortem or learning phase in crisis response is important, yet sometimes forgotten. After the crisis ends, the company examines its causes and takes action to ensure it does not recur. Board members generally expressed satisfaction here, one noting that their company was "pretty vigilant about developing corrective action plans" and using "outside resources." However, one director expressed the need for companies to dig deeper: "sometimes the board has to push management to do a root cause analysis of the crisis, versus just identifying the immediate cause.  Sometimes you will get an assessment of what happened, but not why it happened … If you have a crisis then it's helpful to think about whether the dynamics exist for the crisis to happen again."

Q: In responding to a crisis, how important is diversity on the board—of thought, background and professional experience?

Every director believed that diversity is important in crisis management. One explained that, "diversity of P&L experience and major functional roles is important." As they saw it, the "meatloaf" of board directorship is "understanding legal, financial and fiduciary duties," and "diverse experience adds sauce." Another added, "depending on the industry—for example, highly regulated industries—diversity may be even more beneficial." Still another observed that "diversity is critical, especially in a crisis situation. Different vantage points bring different viewpoints that may be absent in the room—experience on another company or just who they are or how they grew up. Diversity of experience and expertise are helpful and critical. There are so many elements in a crisis—how will the crisis play out, how will consumers view this, etc. It is a missed opportunity if you miss an experience point."

Preston Pugh is a member in the litigation department at Miller & Chevalier in Washington, D.C. A former Assistant U.S. Attorney and appointed compliance monitor, he is recognized for his work in corporate investigations, whistleblower allegations, and has significant experience in multiple stages of crisis management. Contact: [email protected], 202-626-5842.

Abigail (Abi) T. Stokes is counsel at the firm and represents government contractors in all types of litigation and compliance matters. She has extensive insight into Federal acquisitions and managing complex, high-profile, high-dollar value situations through her experience as an attorney for the Navy Office of General Counsel. Contact: [email protected], 202-626-5944;.