20 Questions Directors Should Ask
about Crisis Management
This document has been developed to help members of boards prepare for and handle crises. It is intended primarily for directors and boards of publicly-listed companies but will be of value to other organizations.
Summarized answers to two questions are included below.
How should the board and its members respond to a sudden crisis?
In times of crisis, the job of board members is to make sure the CEO responds
promptly, decisively and effectively.
This often means staying calm and letting the CEO and management team
manage the crisis. But letting the CEO manage does not mean that the board
ignores the crisis. Directors must find out what’s going on and satisfy themselves
that the CEO has things under control. If not, it is their duty to make
sure that the crisis is properly addressed.
Directors should be concerned about:
• Making the crisis worse by jumping to conclusions and overreacting
• Balancing the board’s need-to-know and oversight responsibilities with
management’s responsibility for dealing promptly with many urgent issues
• Talking to the media or anyone else about the crisis — unless they have been
designated and briefed to do so
• Letting the board polarize into a disunited group.
The CEO — or a designate — should contact the board as soon as possible to
inform directors of the situation and management’s initial response and plans.
The chair of the board, working with the CEO, should convene a meeting or
conference call for the CEO and board to review and agree how the crisis will
be managed, and to establish an initial process and schedule for reporting and
monitoring.
How effective would the board be in the
event of a potential or sudden crisis?
Boards and the chair should encourage open discussion and recognize that dissent
is not only likely, but a positive attribute of sound governance. Boards and
committees that complete rigorous assessments of their own performance and
experience provide themselves with an opportunity to recognize early warnings of
deficiencies in the boardroom and to take steps to improve.
Directors should be concerned about:
• The board’s independence, competence, skills and previous exposure to crises
• The quality of board meetings and decision-making
• The leadership skills of the Chair
• The capacity of the board to devote additional time and resources to
governance in the event of a crisis
To be prepared for crises, the board should consider taking the time to confirm
that it and the individual directors would have the resources and inclination
to act if needed. The resources may include independent advisors and special
committees of directors. This could be done as part of the governance assessment
process. It is important that upon the completion of the assessment, a follow up
plan is put in place for the next year, and that any adjustments are made quickly.
The ability to mobilize leadership and resources to resolve problems identified
by early warning signals is essential to protecting stakeholder interests. The board
must ensure all necessary actions required to protect the interests of the organization
are taken. In so doing, the board must recognize the implications of advising
or not advising stakeholders, the impact on board-management relations, and the
board’s legal responsibilities to meet statutory disclosure requirements.
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