Big US banks have had a rough couple of weeks. They choked on requests from small businesses seeking loans under federal COVID-relief programs, while smaller banks and fintech upstarts handled things better.
Of course, banks aren’t the only ones reeling from the crisis. Nearly every industry is facing unprecedented challenges, from keeping their people and facilities safe to recalibrating supply chains and managing remote workers. Companies are also under greater scrutiny, especially for their treatment of workers. Amazon, for example, has been harshly criticized for safety conditions in its warehouses.
In this charged environment, company actions that ordinarily would be routine can draw intense interest.
Take executive pay. Proxy statements filed in a few weeks will ask shareholders to approve CEO pay awards for the distant, tranquil days of 2019. Whopping cash bonuses and equity grants won’t look good at a time when millions of people are suddenly out of work. Companies will need to explain how their pay programs work and how this year’s results could affect executive pay. Any immediate steps, such as salary cuts or bonus exemptions, should also be communicated.
Firm action, active communication
In fact, this tumultuous time means companies will need to communicate actively on a range of issues. In our discussions with clients, we are pointing to several areas where effective communication will be critical:
Disclosure – Companies should be as clear as possible about the impact of the coronavirus on their operations, financial performance and future outlook. Some effects, like sales declines, will be clear immediately, while others will be contingent on how quickly the economy restarts. Investors understand uncertainty and deal with it all the time, but they have little patience for vagueness or evasion. Recent guidance from the SEC on COVID-19 disclosure can be helpful.
ESG – Many companies have made commitments to improve their practices on environmental, social and governance (ESG) matters. If the COVID-19 crisis derails their progress, companies should say why. It won’t be obvious why efforts to improve board gender diversity, for example, would be set back by the crisis. Indeed, some areas, like human capital management and supply chain integrity, could be seen as even more vital.
COVID-19 aid – Every business-support program attracts its share of controversy. So public companies that receive crisis loans or other assistance will need to explain their reasoning and describe how it will benefit all their stakeholders – not just investors or highly paid executives.
M&A – Many valuations have been slashed as a result of the pandemic. That will open the door for M&A opportunities, both from private equity firms (whose dry powder was at record levels before the crisis), as well as strategic buyers looking for growth. But in this environment no deal is simple, and communicating the strategic rationale and benefits will be even more important. There’s a fine line between a well-timed tie-up and a greedy asset grab.
Be the brand
Above all, this is a time when CEOs must live the brand. A crisis tests whether the company’s values really hold up under stress or if they’re as brittle as the PowerPoint slides they’re written on. That’s a theme we’ve written about before, and it’s good advice at any time, not just in a crisis.