Potential Impact of COVID-19 and Social Justice Issues on Nonprofit Corporate Governance
The novel coronavirus (COVID-19) pandemic and the resurgence of social justice movements are likely to have lasting repercussions on how nonprofit entities approach corporate governance. The very intense national conversations about the following issues should cause nonprofit boards of directors to expect certain traditional governance practices to change in response to the lessons and experiences gained from these issues.
1. Lines of Authority
Nonprofit boards and management traditionally work together to allocate decision making between the two parties. However, the line separating the responsibility of the board from the responsibility of management tends to blur in times of crisis. Boards and management should analyze how they worked together during the COVID-19 crisis and social justice protests to ascertain whether work is needed to avoid future crisis-related confusion.
2. Workforce Culture and Hiring Practices
Special efforts should be made to address workforce culture and to have meaningful oversight of hiring practices. Improving diversity in employment is critical, but so are practices relating to recognizing culturally significant issues and events. Board engagement in acknowledging social justice issues, regardless of the nature of the nonprofit’s mission, setting realistic goals, and insisting on management focus will need to be ongoing.
3. Focus on Risk to the Enterprise and Oversight of Business “Resiliency”
The pandemic validates the need for strong board involvement in risk identification and disaster response. There is a heightened obligation to exercise oversight of the future business “resiliency” of the nonprofit. Federal loans have helped many nonprofits during the COVID-19 crisis, but the next crisis may not have this resource to help the nonprofit “bounce back.” Boards will need to monitor management’s plans to recover from future catastrophes or social justice activities, not only from a financial perspective but also a “brand image” perspective.
4. Oversight of Patron Safety
The pandemic has shown the need for enhanced focus on customer safety in many lines of for-profit business, primarily retail and restaurants. Nonprofits also have patrons/visitors whose safety must be protected. A greater board collaboration with management on the quality of patron engagement matters should result in shifts that include more awareness and increased oversight of the resources necessary for emergency preparedness, infection control, and regulatory compliance.
5. Reliability of Key Technology
Depending on the nature of the nonprofit’s mission and business model, directors will want to exercise greater diligence on the acquisition and implementation of key technologies and more detailed contingency planning for the possibility of critical technology, equipment, or personnel being unavailable.
6. Employee Health and Safety
Addressing employee concerns for workplace health and safety matters is now an important element of the board’s oversight of workplace culture. Employee concerns in this regard are likely to remain a key part of business resiliency planning long after the advent of a vaccine or other treatments for the COVID-19 virus.
In short, nonprofit boards should anticipate, for the foreseeable future, an increased level of engagement with their governance responsibilities. This higher level of engagement will be necessary to assure that the nonprofit has, in fact, rebounded, and evaluated potentially broader changes to accomplishing its mission in light of “lessons learned.”
Originally published on July 14, 2020, on FGHWLaw.com; reprinted with permission.
This article was published in the Fall/Winter 2020 issue of Across the Board, a publication of OPERA America for opera company trustees.
Scott Chase
Scott Chase is a partner at Farrow-Gillespie Heath Witter LLP. He is on the Executive Committee of The Dallas Opera’s Board of Directors and chairs the Governance and Nominating Committee.