The Implications of the COVID-19 Pandemic on Corporate Governance: The Board of Directors’ Response

Grazia Dicuonzo and Francesca Donofrio

Chapter 19 in Financial Transformations Beyond the COVID-19 Health Crisis, 2022, pp 555-581 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The COVID-19 pandemic poses a threat to the global economy, leading to the risk of a systemic crisis with devastating global economic impacts. These circumstances have put a strain on corporate governance systems, which have had to address major new problems and challenges. This chapter aims to investigate the board’s reaction to the COVID-19, by providing an overview of the actions taken at the corporate governance level in the first phase of the pandemic. We first look at the actions taken by companies to support corporate governance; second, we examine the strategic actions implemented by companies; and finally, we investigate the actions taken by the board that had financial impacts on firms. In order to achieve our goal, we used the methodology of framing analysis. In particular, this study investigated the content of press releases of Italian FTSE MIB (Financial Times Stock Exchange – Milan Stock Exchange Index) companies. Our findings show that the corporate governance of the examined firms has implemented cost reduction actions, carrying out action plans aimed to mitigate the financial impacts related to COVID-19. Regarding changes to top management remuneration policies, some companies have updated their short- and medium-term strategy or developed a new shareholder remuneration policy. In addition, most of the analyzed firms have put in place initiatives to actively support the country’s efforts to overcome the current emergency by providing means and resources. The analysis of corporate press releases revealed that the COVID-19 pandemic challenged corporate survival. As such, our contribution has practical implications by providing an overview of the actions taken by corporate governance to respond to the COVID-19 pandemic. Moreover, our study can serve as a support tool for firms in the process of defining actions and strategies to respond to crisis events, especially if they affect the whole economic system.

Keywords: COVID19; Pandemic; Pandemic Outbreak; Health Crisis; Economics; Macroeconomics; Finance; Sustainable Finance; Financial Crisis; Financial Integration; Economic Integration; Global Financial Crisis; Financial Institutions; Corporate Finance; Corporate Governance; Board of Directors; ESG; Corporate Social Responsibility; Sustainable Finance; Stock Markets; Financial Markets; Stock Market Behaviour; Firm Liquidity; Emerging Markets; China; Financial Institutions; Money; Banks; Banking System; Banking Sector; Business Groups; Resilience; Safe Heaven; Gold; Oil; Peer-to-Peer Lending Market; Foreign Trading; Stock Market Volatility; Extreme Events (search for similar items in EconPapers)
JEL-codes: F4 F62 G15 G17 G3 O16 (search for similar items in EconPapers)
Date: 2022
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