1. COVID-19-IMPACT ON CORPORATE GOVERNANCE
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December 12, 2020
FOREWORD- THE CONTEXT
Though corporate governance may not be an obvious focus during a pandemic, it is during these testing periods that
leadership and management structures are tested, exposed for their strengths or flaws, and remembered by
stakeholders in the long-term. The current context requires companies to assess the immediate health, social and
economic factors facing their immediate survival, without losing grip on their long-term prospects. It is a challenging
array of competing issues to confront.
Though some ESG (Environmental, Social and Governance) issues are not front of mind for steering through this
pandemic, the ‘G’ in ESG is a vital ingredient to coming out the other side strongly. In the short term, poor governance
structures are likely to be exposed during such periods of crisis, while well-governed companies will act more
decisively to contain its impacts and provide much-needed transparency and consistency to their stakeholders.
In the long-term, the capacity for a company to effectively and appropriately manage and navigate its way through
this pandemic will be remembered by its investors and clients. Crises been and gone have been the ‘make or break’
moment of many companies throughout the course of history. The most critical considerations are as follows:
Capital Management
Financial prudence is a necessary outcome of the current situation. We aim to work with our companies to ensure that
financial resources are appropriately allocated to stakeholder management and balance sheet and business resilience.
The appropriateness of planned activities such as dividends and share buybacks must be carefully weighed against
this near-term necessity. COVID-19 has prompted changes to workforces and shareholder experience, which is leading
to discussion and actions around remuneration schemes, including those of executives. There are a number of examples
of reductions in executive remuneration in recognition of the changed environment. Changes in pay ratios of executives
to average workforce and/ or adjustments to equity compensation plans, among other remuneration features, are likely
to come under heightened scrutiny. Increased interest of shareholders in remuneration proposals over the coming year
is anticipated.

2. COVID-19-IMPACT ON CORPORATE GOVERNANCE
2
December 12, 2020
Broad Structure & Oversight
The COVID-19 crisis has also given weight to the case for assessing the diversity and capacity of boards and those
who hold board positions respectively. Given the average demographic of those most likely to be impacted by the
virus- namely older males- the continuity and diversity of boards and executive teams may be increasingly called
into question. Furthermore, busy directors who serve on multiple boards may have constrained capacity to provide
adequate oversight at such a critical time. What is required is that we are engaging with our investee companies to
ensure that governance and oversight processes are still functioning effectively and with robust meeting attendance
rates, with clear succession planning a critical priority.
Risk Management
COVID-19 has undoubtedly uncovered a widespread lack of stress-testing and deficiencies in disaster preparedness
and scenario planning, which is reflected in the number of emergency capital raisings occurring at present and the
pausing of planned growth projects- particularly in the resources sector. Going forward, it is anticipated that there
will be far more scrutiny over a company’s risk management, crisis management and business continuity planning.
Companies will be expected to disclose more details on their risk management frameworks and undertake rigorous
stress testing, preferably aligned to international best practice standards such as ISO31000, as well as to maintain
strong board-level risk management experience.
Cyber Security
Cyber security has been a growing threat across all industries in recent years and for which companies have varied
levels of preparedness. The need for social distancing and rapid shift to the work-from-home economy has
exponentially increased our reliance on the internet, and in turn raised our vulnerability to cyber-crime. We have
been engaging with companies for some time already on having the appropriate cyber governance structures and
risk management frameworks in place. Companies that have invested in shoring up their cyber defences will be more
resilient in the current paradigm than those facing severe risk of major cyber disruptions to their operations.