COVID-19 PANDEMIC AND CORPORATE GOVERNANCE
IMPLEMENTATION
Introduction
The World Health Organization (WHO) declared the Covid-19 virus a global pandemic
on March 11, 2020. The pandemic caused by the Covid-19 virus has created a
multidimensional crisis that is very different from previous systemic crises, such as the Asian
financial crisis in 1997, the global financial crisis in 2008, the European debt crisis in 2011.1
In 2008, the world experienced a global financial crisis, when policymakers rushed to provide
assistance programs to rescue financial institutions and companies, it triggered a major
liquidity crisis. At that time leading banks and financial institutions such as Lehman Brothers,
Freddie Mac and Fannie Mae, Northern Rock collapsed. More than ten years later, in 2020,
the world was gripped and paralyzed by the Covid- pandemic crisis 19. What is important to
note here is that the pandemic crisis is very different from the global financial crisis, which
has a spillover effect on the economy. On the other hand, the Covid-19 pandemic crisis is a
health-related crisis, which not only has a widespread impact on the economy at the same
time, but also impacts our daily lives.
The Covid-19 pandemic has disrupted businesses and economies around the world.
Restrictive policies implemented by many countries have led to a decline in GDP and an
increase in unemployment to levels worse than The Great Depression.3 Some economists
have predicted a worldwide recession as a result of the pandemic. Governments, central
banks and global economic institutions have taken a series of policy measures in order to
save companies and businesses from collapse. Policymakers around the world have sought
various measures to deal with the coming economic downturn.
In United States, the Covid-19 pandemic has slowed the national economy, reduced
income, increased unemployment, increased poverty and generally reduced welfare. With the
outbreak of the coronavirus (Covid-19), the government, Bank United States, and OJK have
issued various budget, currency, and financial services regulations to support national
economic recovery efforts.5
Facing the Covid-19 pandemic, there is a complex new reality as an impact that
directors must face.6 The new environment is characterized by pressures and demands from
various stakeholder groups, high expectations for community engagement and corporate
responsibility towards society and radical uncertainty about the future. These factors
complicate directors' decision-making and produce a number of challenges in the
implementation of corporate governance during the current Covid-19 pandemic.
A critical impact of the pandemic is that the law, company stakeholders and public
policy will expect directors to be more responsive in responding to rapidly changing
circumstances, in good faith. Directors will be required to evaluate the impact of governance
at the time of the pandemic, and implement changes that are believed to be appropriate to the
circumstances.9 This does not mean that all corporate governance principles will be
permanently altered by the pandemic, but certain principles including those relating to board
or management dynamics, the level of director involvement, and oversight of certain
management functions, are likely to be altered to a significant degree.10 The Covid-19
pandemic has also highlighted the importance of using technology to transform the way
organizations achieve their goals. Covid-19 has examined the digital transformation strategies
undertaken by directors.11 The purpose of this research is to find out how the Covid-19
pandemic corporate governance in a company.
Research on corporate governance has been conducted by Chairia (2020), which
explains the decline in sales of Islamic insurance products, including because marketing and
distribution activities of Islamic insurance products are hampered. The purpose of this
research question is to analyze the importance of progress in the implementation of the
corporate governance system (Islamic Corporate Governance) in all Islamic insurance
products companies around the world during a critical period, as the world faces the
challenge of stopping a huge wave with negative impacts. The impact on the world economy.
The method used is desk research. The conclusion of Chairia's study is that the key to
effective financial protection is to ensure affordability, prepayment and pooling of resources
for health, rather than relying on people paying for health services themselves at the time of
use.12 Chairia's research has similarities with this study, which is the same regarding
corporate governance. However, Chairia's study focuses on the implementation of Islamic
corporate governance. Meanwhile, this research discusses the company as a whole in
implementing corporate governance policies in the scope of sustainability, welfare and IT
infrastructure.
In addition, research conducted by Darmin Tuwu (2019) related to government policies
in handling the Covid-19 pandemic has the aim of collaborating government policies in
preventing and overcoming Covid-19. The method used was qualitative, and a qualitative
study of government policies and incidents related to government policies in preventing and
handling Covid-19 was carried out through the case study method. The results showed that
government policies in preventing the spread of Covid-19 include: stay-at-home policies,
social distancing, large-scale restrictions, wearing masks and the like, work from home,
avoiding crowds, and new normal. And the government also implements social assistance
and social protection policies. 13 The research written by Tuwu has similarities with this
research which was written in the context of the Covid-19 pandemic and the implementation
of prevention. However, Tuwu's study focuses on government policies in dealing with the
Covid-19 pandemic. Meanwhile, this research focuses on discussing the Covid-19 pandemic
and the implementation of corporate governance in companies.
Research on corporate governance has been conducted by Azhar et al, (2020). His
study was conducted on the impact of the Covid-19 pandemic. The problem studied by Azhar
is facing shocks and challenges that are not easy to face during the Covid-19 pandemic. In
this case, the government's performance will be tested transparently in front of the public.
The purpose of the research question is to find out the implementation of good governance.
The government will take several steps and decisions and implement them to the public to
emphasize the positive numbers of Covid-19. Other key elements support, one of which is
public communication. Therefore, during this Covid-19 pandemic, the approach taken to the
community to comply with all policies has achieved maximum results.14 The research written
by Azhar has similarities with this research, namely implementation in the implementation of
good governance. However, Azhar's study focuses on government strategies in implementing
good governance. Although this research focuses on the implementation of corporate
governance. Based on the above background, this study aims to analyze the effect of the
Covid-19 pandemic on the implementation of corporate governance in a company.
Methods
This type of research uses the literature review method. A literature review is to review
or access various documents published in the academic world or other researchers previously
related to the research topic. The type of research used in this study is descriptive qualitative
research, and the descriptive method is two cross sectional methods. The literature data
search used in this study is not complementary data obtained from direct observation, but
from the main data, namely previous research journal articles related to the research title.
Results And Discussion
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
Corporate Governance in Pandemic Times
During the current Covid-19 pandemic, corporate governance practices are being tested
and questioned. This unprecedented period has triggered a wave of economic crises, forcing
companies to close operations, let employees take leave, bankruptcies and management
crises.15 The radical changes brought about by the pandemic require companies to be able to
deal with the challenges and changes that exist. In addition to the responsibility for the
sustainability of the company, the board of directors' top priority is the prudent allocation of
capital by, among other things, re-evaluating dividends and executive remuneration programs
and scrutinizing every expenditure. Directors must ensure that they are prepared for the rapid
digital transformation that is occurring during the pandemic by having the appropriate
technology infrastructure in place and requiring investment in order to innovate and support
digitalization.
Corporate governance, broadly defined, consists of the institutional structures, legal
rules and best practices, which determine which institutions within a company have the
power to make certain decisions, how members of these institutions are selected, and the
norms that guide decision-making.17 The legal aspect is an important factor in the
enforcement of corporate governance. It is certain that corporate governance will not work
well under a weak legal system. Therefore, legal reform is an absolute requirement for the
realization of corporate governance.18
International principles on corporate governance include19 : (a) Shareholders provide
accurate company information in a timely manner, participate in the decision-making of
major changes in the company, and participate in the right to own shares. (b) Treat
shareholders equally, especially minority shareholders and foreign shareholders, disclose
important information, share it with shareholders, and prohibit share trading; (c) Recognize
the role of shareholders in accordance with the law, and ensure that companies and
stakeholders actively cooperate in the creation of wealth, employment, and financially sound
business entities; (d) Make all matters related to company operations, ownership, and
stakeholders accurate, timely, and transparent; (e) Management's responsibilities, as well as
its responsibilities to the company and its shareholders
Impact On Directors
In United States, the regulation of corporations is regulated in Law No. 40 of 2007
concerning Limited Liability Companies (PT Law). According to Article 1 point 5, the board
of directors is the organizational structure of the company, which according to the company's
articles of association is responsible for the running of the company and the management of
the company and represents the company in and out of court, based on the interests and
objectives of the company. Therefore, the PT in this case is the board of directors as a legal
entity engaged in law. The cause and effect of the fiduciary duty between the legal entity and
the board of directors is the relationship between the legal entity and the management. The
role of the trustee in PT is mainly related to the position, authority, and responsibility of the
board of directors.
During the current Covid-19 pandemic, the role of the board of directors in crisis
management has become even more important to ensure business continuity. Directors must
be proactive and show leadership at a time like this. Their role is critical in instilling trust and
ensuring business continuity. Effective communication is becoming increasingly important to
ensure efficient decision-making.
Long-distance working patterns are a challenge in realizing effective communication by
the board of directors. The steps that can be applied by boards of directors around the world
in maintaining effective communication are one of them is by conducting online meetings.22
As we all realize, the social restriction policy imposed by governments in various parts of the
world in order to break the chain of the spread of Covid-19 has become a push factor that
triggers the acceleration of digital adoption and transformation in all aspects.23 In United
States, The online GMS policy has been adjusted through POJK No. 16/POJK.04/2020 on the
Implementation of General Meeting of Shareholders of Public Companies electronically,
which will be effective on April 20, 2020. The existence of the POJK is to adjust to public
companies that are registered to conduct GMS through electronic media (such as
teleconference media or other electronic media facilities) when issuing securities publicly.
And what about day-to-day operations? With remote working patterns, the board of
directors must have a contingency plan prepared as a technology solution to minimize
disruptions in their business.25 This digital or technological transformation has created new
risks related to cyber security that need to be managed well by management. Cyber security
oversight is a key fiduciary responsibility for the board of directors.26 If a person trades
business, property, or wealth not for his own benefit, but for the benefit of another, it is said
that he has fiduciary capacity. The person who gives him the power trusts him greatly, and
the trustee must have the sincerity to carry out his duties.
Next in terms of financial sustainability, directors may have to reconsider dividend
payments, all capital expenditures, hiring new employees and other types of expenditures that
are not meaningful and can be postponed. A case in point is Royal Dutch Shell which has cut
its dividend for the first time since the second world war in response to falling oil demand
due to the coronavirus pandemic. With limited liquidity and working capital, directors must
explore their refinancing arrangements, government funding and the viability of available
schemes for their survival.
In terms of disclosure, directors have a moral responsibility to disclose to investors and
the public any pertinent information relating to their business. This is especially so in the case
of companies listed on regulated markets where such disclosure is mandatory. Any material
changes in internal controls and audits of financial reporting will require disclosure. Constant
monitoring of the situation and communication of this assessment is necessary. As the board
of directors ventures into uncharted territory, it must act responsibly to ensure a business
continuity plan is in place. These unprecedented circumstances are a reminder of the
importance of strategic and collaborative leadership. There must be a management process in
place to identify potential threats, pre-plan and safeguard critical business.
In general, a company director has the responsibility to oversee the business and affairs
of the company, which requires the director to make a good faith effort to implement
reasonable monitoring and reporting systems. Courts in the state of Delaware-US, have found
that a director's supervisory failure will occur (1) if the director fails to implement a corporate
reporting or information system or control or (2) if such a system or control is implemented,
the director knowingly fails to monitor or supervise the operational performance of the
company, thereby distancing themselves from information about material risks or issues that
require their attention.
Given that the board of directors' oversight responsibility is an issue in good corporate
governance, some specific active measures that directors need to consider in response to
Covid-19 include the following:
Enhance the company's existing reporting and information systems used by the board of
directors to conduct oversight. This system will help ensure that the board can receive
relevant information in a timely manner to monitor Covid-19 issues and their potential risks
and impacts on the company.
A possible tool available to the board of directors to perform its monitoring and
oversight responsibilities is to establish a committee that can be tasked with evaluating and, if
necessary, adopting available preventive and corrective measures regarding the impact of
Covid-19 on the company's operations and business.
Improve communication with company management. The Board of Directors should
consider enhancing and continuing to engage in open dialog with company management
regarding business risks and workplace health and safety issues posed by Covid-19. The
Board of Directors and management should review legal and regulatory developments
regarding Covid-19, review the company's risk mitigation policies and protocols and adapt
those protocols to evolving regulations.
Confirm the feasibility of the company's disaster recovery plan. The disaster plan
should address matters such as employee availability, IT system functionality, cybersecurity,
communication protocols, and legal/regulatory compliance. Due to the unique nature of
Covid-19, the board, as part of its ongoing monitoring and oversight responsibilities, should
continue to discuss implementation issues with management and evaluate whether any
modifications to the disaster plan are necessary to address new issues that arise.
Evaluate potential disruptions to business operations and relationships. This evaluation
may include ensuring that management appropriately considers34 : The impact of Covid-19
on key customers, suppliers, financing sources and service providers, as well as a review of
key contracts to identify potential issues related to force majeure, triggers for default and
termination rights, and related contractual terms. The company's ability to access government
emergency funds or other programs initiated after the Covid-19 crisis. The adequacy of the
company's insurance coverage and whether appropriate measures have been taken to defend
potential claims. Review board and management succession plans. The board of directors
should consider implementing a detailed emergency succession plan that takes into account
the unavailability of the company's directors, officers and key managers.
Reassess long-term corporate strategy. Undoubtedly, the Covid-19 pandemic has
brought new and unique challenges to most businesses. Focusing on the critical functions of a
company is certainly a priority for boards of directors. However, once the critical areas of
need are addressed, the board may want to consider the implications for long-term corporate
strategy given the environmental changes caused by Covid-19. This may include cultivating
new alliances, developing more innovation and technology, making acquisitions, exploring
lower cost financing structures, developing new employee benefit plans and evaluating other
needs.
Impact on Managers
Corporate managers, policymakers and lawyers tend to use corporate governance in a
narrow sense. For them, corporate governance is a system consisting of rules and systems,
which determines the control and direction of the company, and also describes the
relationships between company participants.37 The elements of corporate governance within
the company consist of shareholders, directors, board of commissioners, managers,
employees/unions, performance-based remuneration systems, and audit committees.
The crisis caused by the pandemic has put great pressure on communication between
managers and directors.38 Managers need support, advice and counseling from directors and
directors should strive to make themselves available and open and communicate with
managers. Effective and frequent meetings with managers are an ideal way to keep in touch
with managers and provide them with the technical, mental, physical and emotional support
they need in an unprecedented era. The ability of both components of leadership within the
Company to carry out their duties in times of crisis requires a shared understanding of the
fundamental differences between the role of corporate governance and the role of
governance management. This is especially the case as both are trying to meet the
expectations on them that have risen due to the crisis caused by the Covid-19 pandemic.
Impact on Stakeholders
Shareholder/Owner
Capital owners always try to improve the welfare of their owners or shareholders by
increasing the efficiency of their business or increasing shareholder capital. Company
performance must be a measurable result and must determine the company's situation with
different sizes according to agreement. 39 During the Covid-19 pandemic, the global economy
has experienced an unprecedented turmoil of uncertainty. In this regard, shareholders have
the right to know about their investments.
Directors should communicate with shareholders about the ongoing impact of Covid-19
on their investments and also the potential future impact. Shareholders need to be aware of
the financial position, liquidity and any operational changes that may impact shareholders'
investments. Directors should ensure the company provides information to keep investors and
shareholders informed of the developments and uncertainties of the crisis due to the Covid-19
pandemic.
On the other hand, the Covid-19 pandemic has made it clear that the company's goal is
not solely to maximize returns to shareholders. The board of directors, therefore, should also
pay attention to various factors that enable the company to create value over time.41 In recent
years, companies have increasingly realized the importance of corporate social responsibility
(CSR) plans as part of their business strategy.
Employees
Some sectors such as the tourism sector, movie theaters, restaurants are among the
hardest hit compared to other sectors such as supermarkets.43 The current crisis may
spearhead a fundamental change in leading working practices for more uncertainty into the
workplace. Directors have a role to play in ensuring a smooth transition to remote working,
providing welfare support and/or communicating 'furloughing' their employees. Digital
literacy is critical and should be supported to enable employees to be technologically literate
to cope with any future pandemics and/or natural disasters.
Customer
Customers want to be reassured about how they will be served in the midst of the
pandemic. Customer service teams should be trained to show that the company still values
customer feedback and the company website needs to be updated constantly with any
changes to the company's policies in relation to the pandemic. Directors should ensure that
customers are well informed about the steps the company has taken to combat the crisis.45 For
example in the UK, with travel restrictions, British Airways keeps its website updated on the
latest policies on bookings. This is an example of good practice. Directors should ensure that
information and policies relating to operational changes are effectively and clearly
communicated to all customers.
Accountability, Information Flow, and Monitoring
The Covid-19 crisis emphasized the importance of the company's internal and external
accountability mechanisms. The level of information asymmetry between internal and
external stakeholders - as reflected in the quality of ex-ante disclosures - will shape
stakeholders' ability to ascertain the impact of the crisis on individual firms. Such diversity
has a direct and observable effect in terms of firms' ability (and cost) to access resources to
deal with the crisis.
Conclusion
From the explanation above, it can be concluded that the Covid-19 pandemic has had a
significant impact on the company's supervision and management methods. The Board of
Directors is faced with a number of complex challenges between how to maintain the
continuity of the company's business operations amidst the wave of crisis and economic
uncertainty due to the Covid-19 pandemic crisis and how to meet the expectations of various
stakeholders while still prioritizing the principles of corporate governance. The Board of
Directors must be able to implement effective communication to all company stakeholders
and ensure efficient decision-making, evaluate potential disruptions to operations and
business relationships, create a detailed emergency succession plan that takes into account the
unavailability of the company's directors, officers and key managers, and reassess the
company's long-term strategy.
