risk v reward

The shock of COVID-19 and the slide into a deep recession may lead directors to question whether they have the energy for a long haul to recovery, if they have over-committed themselves, and whether the risk is worth it. Some are grateful to put their experience, strategic thinking and skills to use during the crisis. Others may be overwhelmed by the workload and the experience of having to make so many life-altering decisions on behalf of employees.

However, BlueScope non-executive director Kathleen Conlon FAICD says that while boards are under a great deal of pressure, the personal risks are not the same as those that directors faced during the 2008 global financial crisis. During the GFC, there was an assumption that the directors of failing companies were, in some sense, the architects of their own problems. “It was the company’s fault,” says Conlon. “You were poorly managed. There was the onus on you to prove that you weren’t an idiot. Whereas, here [in 2020], it’s completely different. The assumption is actually that it’s a shock and you would be doing fine otherwise.”

While the workload has increased, physical distancing and closed borders mean that directors do not have to travel for their meetings, says Conlon, who has five board positions — BlueScope, the Benevolent Society, Lynas Corporation, realestate.com.au and Aristocrat Leisure. “All that travel is gone, so I’ve had lots of board meetings, but they’ve been shorter and sharper,” she says. “And I haven’t had to get on an aeroplane.”

Before COVID-19, Conlon says she would dedicate one to two days a month to each company for board meetings. At the time of writing, those meetings were being held every two weeks.

This situation is “in some ways more intense and in some ways, less intense”, she says. “While directors have to absorb massive amounts of information during the pandemic, all of the companies are facing the same issues. I chair four remuneration committees, so the remuneration issues are the same. How do we think about a black swan event in the context of rem? From that standpoint, it’s not actually additional work, it’s the same issue.”

Conlon says she weathered some gruelling times in her eight years with rare earths producer Lynas, which was in turnaround mode, and she understands the intense levels of stress that occur when a company is struggling. There were times, during Lynas’ “near-death experience” — when China flooded the global rare earths market and almost sent the Australian company bust — that she told her husband she would love to get off the board.

“The money you get paid as a director sounds great, but when you’re under that level of personal stress, you would feel that this is not worth it,” she says. “The easiest thing for me would have been to come off, but it wasn’t the right thing to do.”

The COVID-19 crisis and recession will test the mettle of directors. “Some do disappear into the sunset, but most will step up and do what needs to be done,” says Conlon.

Peak performance researcher Dr Adam Fraser, founder of the Energy Factory, says many leaders are using this crisis to rethink the way they do things. “They are much more focused on wellbeing, displaying care for their people and really being more of a supportive, evolved leader,” he notes. Despite what is commonly thought, people do not lack resilience, says Fraser, author of Strive: Embracing the Gift of Struggle. “Over the past five years, we’ve been studying resilience levels in organisations and what we’ve found is that people’s resilience is through the roof,” he says. “We showed this with the partners in PwC, executives in banks, school principals, people in collections departments. People don’t lack resilience. What they lack are recovery and self-care.”

“This situation is in some ways more intense and in some ways less intense. While directors have to absorb massive amounts of information during the pandemic, all of the companies are facing the same issues.” Kathleen Conlon FAICD

Time for a rethink

Kate Thiele FAICD, founding director of advisory group Klarity, says she has talked with directors who are reconsidering the shape of their board careers in the wake of COVID-19. They are debating whether, if they have to increase their commitment to each board from now on, they should be on fewer boards or manage their participation differently.

Thiele is also executive director of Meals on Wheels Australia and a former CEO of Guide Dogs SA/NT. She found herself in the thick of the health crisis when her part-time contract role steering Meals on Wheels nationally suddenly became a full-time one throughout the peak of COVID-19.

Up to 30,000 of the organisation’s 76,000 volunteer workers are of an age where they were required to self-isolate. This meant the charity had to use its networks to mobilise support from other organisations, the public and the business community to get food out to its 120,000 clients. Demand for its services shot up by 25 per cent in the first week of the crisis and then settled back to a 10 per cent increase.

Thiele says an experience such as COVID-19 should warn aspiring directors who imagine they can be on a not-for-profit board while on “training wheels”.

“There may be a perception that cutting your teeth on a not-for-profit board is a good way to step into a directorship. My sense is there is no P plate. You have to be very sound. Your skills have to fit, and you have to know why you’re there,” says Thiele, who is also chair of Adelaide Crows Foundation, and board member of Zoos South Australia. She says NFP directors have to handle the same risks as those on for-profit boards, “but, potentially, with less capacity and fewer resources to [help] make good decisions.”

Managing stress

Peak performance expert Dr Adam Fraser says those who have handled the crisis well exhibit four key behaviours.

  1. They can sit with the discomfort of struggle Fraser says we are often told to turn our negative thoughts and emotions into positive thoughts and emotions before we can move on. “The research shows that often leads to dysfunction because it’s really hard to do. So we either use alcohol or drugs, zone out in front of screens, or attack and blame other people to make ourselves feel better. The people who handled struggle really well were able to just tolerate the discomfort. And that ability to sit and tolerate it stops the knee-jerk reaction of ‘how do I make this feeling go away?’ If we can’t sit with our negative thoughts and emotions, we don’t learn about ourselves. We don’t evolve, and it tends to make us fall into dysfunctional behaviours.”
  2. They accept their own reactions without judgement During the pandemic, people tended to “beat themselves up” because they felt they were not doing enough or because they were frightened, says Fraser. By accepting that your response is a normal reaction, you can move on more quickly. “It’s about self-compassion, too.”
  3. They focus on the development that comes out of struggle “They have accepted the discomfort of their situation, but look to grow through being more compassionate, more connected to their family or by learning to display understanding for other people.”
  4. They look for the most constructive behaviour they can do immediately to “win” the moment Ask what can I do right now that will improve my situation?