Dear Board Doc: Thinking Ahead to Our Covid-19 Report Card

The MFDF’s Board Doc is an occasional feature of the Daily News Feed that features questions from our readers. The answers and commentary provided in our responses do not constitute legal advice and should not be treated as such. Please consult with your independent counsel on questions of compliance with the securities laws and director fiduciary duties. If you would like the Board Doc to consider your questions, please e-mail

Q: The pandemic has ushered in several changes for our board, including more frequent meetings, both virtual and telephone, and having to execute our oversight role in new ways.  These changes have highlighted surprising skill competencies on our board as well as some areas needing improvement. Do I address these areas for improvement now, and how would I do so, or would it be better to wait until after the pandemic?

A: While the global health pandemic has created a crisis unforeseen in its length and scope, it is certainly not the first crisis to challenge the mutual fund industry or fund boards. Directors can look back to the financial crisis of 2008, the terrorist attacks of Sept 11, 2001 as similarly momentous in terms of impact. It may still be too soon to start scoring overall board performance but self-examination can be helpful while the issues are fresh in everyone’s minds and the urgency has somewhat abated. Indeed, a recent survey by governance consultancy Spencer Stuart looked into how corporate boards have been adapting to the crisis. Some interesting takeaways that may be instructive to fund boards: only 8 percent of the respondents thought the crisis exposed skill gaps on their boards, however proper succession planning was found to be lacking, and the demands on directors’ time increased dramatically enough to leave employed directors and directors on multiple boards extremely busy, the report said. Still, corporate boards overall are tackling the challenges of the moment, and fund directors are no doubt doing so as well.

In terms of improvement, directors should be continually assessing whether they have the time and resources to fulfill their fiduciary obligations. First, you may choose to virtually meet with your governance chair to discuss your concerns and thoughts on conducting a board-wide check-up.  Boards together with their counsel or third-party consultants can engage a number of tools in this remote environment. Questionnaires and survey forms as well as anonymous interviews with counsel or a third-party consultant can gauge other directors’ opinions on how the board is performing during this crisis. Meeting platforms such as Zoom also feature anonymous survey and polling applications.

Lines of inquiry can be specific or general such as: Do we individually and as a board understand our responsibilities and recognize our limitations? If we are unfamiliar with the current threats, are we actively engaged in acquiring education? Are we asking for and taking advantage of technology tutorials? Are directors engaging with the technology satisfactorily or is more training necessary? Are we paying proper attention to compliance/internal controls/risks? Are we asking for and receiving quality information from management? Are we having problems with the availability of directors for extra board meetings and discussions? Are we prepared and adaptive in this fast-moving environment? Once you have gathered the information then you can begin to chart the path to improvement and achievable goals with counsel or your consultant. An individual gut-check on performance need not be a formal nor time-consuming process and a director need not wait until the end of the crisis. Boards may be in a better situation now to take stock of their initial reactions to the crisis and even consider ways to improve their performance as the new normal persists.