Role of Directors During The Pandemic by Snigdha Mohapatra At LexCliq

Lockdown due to Covid-19 has an unprecedented effect on the economy of India and has severely affected small industries and start-ups. Most businesses have to strategize their existing business plan in a manner that will enable them to survive in the long run. Companies are facing a financial crunch as less revenue is generated and there is uncertainty regarding the financial environment after the lockdown. The board of directors and top management has to take steps to protect their organization, employees, shareholders, and customers.

Damages faced by Companies due to Covid-19

All the companies have been affected due to this pandemic and most of the big corporations have temporarily suspended their operations. Even though the government has eased the lockdown restriction and slowly the companies have started to continue their operation but they are not able to work in full capacity as the movement of people is strictly restricted. The biggest challenge faced by small businesses is to resume their operations after lockdown. Employers will have to incur additional costs to make sure of a healthy work environment for their employees after restarting their business. Companies will have serious cash flow problems due to which companies will resort to the reduction of salaries or laying off employees. Companies will also have to incur heavy expenditure for strengthening their IT infrastructure. Data protection is very important to prevent the breach of data.

The revival of the economy and job recovery will depend on the policies which are implemented by the government. Some of the industries such as aviation and tourism which have been the most affected will continue to suffer until the pandemic exists. Supply chain disruptions harmed businesses and it also led to shutting down a lot of small businesses and startups. Supply chain risks should be minimized by assessing each and every level and businesses should also try to diversify the same. Due to the pandemic, there is still a lot of uncertainty regarding the performance of contracts.

Role of directors during this Pandemic

Keeping in mind the duties and obligations of directors need to take steps for the survival of business in this pandemic. Some of the primary considerations of the directors should keep in mind are as follow:

  • Health and Safety of Employees- The top priority of the directors should be the health and safety of its employees, workers, customers and suppliers. The emphasis should be given to the safety of employees rather than work. It is the responsibility of the employers to create a safe environment for the employees even if the lockdown is lifted. If the nature of work is such that the employees can work from home then they should be allowed to work from home. In cases of extreme necessity visits to offices and factories should be allowed. Several precautions and measures should be taken before offices are opened. Social distancing norms should be followed by the employees for their as well as other people’s safety. Directors should communicate with the employees and agendas should be discussed with them. Government circulars and advisories should be given utmost priority and should be followed strictly. Data security measures should be taken to prevent data breaches or losses.
  • Financial Assessment of the company- Since the company cannot function according to the business structure and operational plan so there needs to be a detailed financial assessment that has to be done to create a crisis plan. Companies should conduct a proper assessment to determine the revenues and expenditures and to understand the financial condition, investigate the effects, risks and opportunities associated with the current crisis. The financial assessment should be done taking the factors such as revenue, expenditure, operational efficiency, liquidity, etc into consideration.
  • Crisis management plan- Based on the above assessment the company has to strategize and come up with a plan to tackle the challenges. The crisis plan should be carefully executed and communicated with the management. The board should be able to make quick decisions in a situation that requires prompt actions. The board needs to analyze the contractual disputes due to non-performance and try to renegotiate with the parties. Legal opinion should also be taken regarding the rights and obligations of parties in contracts.
  • Securing the interest of shareholders- Shareholders should be made aware of the current situation of the company. Companies should be honest while communicating with the shareholders and also make them aware of the crisis plans to tackle challenges caused due to Covid-19. If the company has enough cash reserves to pay dividends to the shareholders then it should continue to pay. Shareholders always look for honesty and transparency so it is in the best interest of the company to present correct information. The board needs to come up with a communication strategy to keep the shareholders informed.
  • Obligation towards staff and employees- The directors should have confidence in the management and its employees to execute the given duties. Staff should be provided with necessary assistance and guidance must be given to the employees. Management and employees should be given information about the crisis plan and each employee should be assigned specific roles. Effective communication should take place between the directors and the management to make sure that the work assigned to management and employees is done properly. Regular updates must be given by the management to the directors given the rapidly changing circumstances. This also helps the companies to retain their best talents. Directors should have reasonable expectations and should not overburden the employees with work. Maximum efforts should be taken by the companies to retain their employees.
  • Avoid conflicts of interest- A director should not engage in any activity which might result in a conflict of interest. The director should not have any personal interest while deciding for the company. The director must disclose all relevant information to the board as it might create grounds for a dispute with shareholders and damage the long term prospects of the company. If the director has an interest in any transaction then it should be disclosed to other members of the company.
  • Long Term Goals- There are multiple ways to successfully mitigate the impact of Covid-19. The primary goal of any company is to find ways to fight Covid-19 but at the same time, it should not lose focus on the long term goals of the company. Each decision taken by the company should be taken with utmost care as it will have a lasting effect and it should not depreciate the goodwill and reputation of the company.


Most of the companies were never keen on developing a contingency plan and it has affected them in a significant manner. A lot of small businesses are on the verge of shutting because of not foreseeing and preparing for a situation like this. Covid-19 should be considered as a lesson for all the directors and managers. Directors and the employees should work with each other in peace and harmony and make sure that the company survives this storm.

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