In 2020, directors talked about employee safety, health and mental wellness more than ever before, and many say they are glad the “stigma” surrounding these issues is being pushed aside in favor of action. Since 2021 began with a still-record number of COVID-19 cases plus political unrest in the Capitol and around the country, boards will have to continue to support management on matters of employee health.
Consider what Amazon.com, Inc. encountered at the end of the year, just as the first COVID-19 vaccinations were rolled out.
Xavier Becerra, then-California attorney general and the nominee for U.S. Secretary of Health and Human Services at press time, petitioned the state superior court to order Amazon to comply with subpoenas in an investigation into the company’s coronavirus protocols and COVID-19 cases at its facilities across the state. Demonstrators protested the company’s pandemic working conditions, including a march on CEO Jeff Bezos’ Beverly Hills mansion.
“Amazon has made billions during this pandemic relying on the labor of essential workers. Their workers get the job done while putting themselves at risk,” Becerra said in a statement. “It’s critical to know if these workers are receiving the protections on the job that they are entitled to under the law.”
In response, Amazon said in December that the company has implemented 150 process updates, including enhanced cleaning and social distancing. The same month, it also temporarily shut down one of its warehouses in New Jersey because of rising asymptomatic COVID-19 cases, according to news reports.
Amazon’s plight could be a warning signal for directors in 2021 as employees acknowledge workplace struggles not experienced in modern times. Large numbers of workers report burnout, fears of getting sick, disengagement from work, financial burdens and mental health issues. More than one in five employees say the pandemic has greatly or very greatly threatened some parts of their jobs, according to a Society for Human Resource Management (SHRM) survey on the impact of COVID-19 on mental health.
“State and federal regulators and prosecutors, I anticipate, are likely to step up their actions against company practices that fall short in protecting employees during the COVID-19 crisis,” says Michael Useem, a professor of management at the Wharton School of the University of Pennsylvania. “[This is] partly because more employees are affected as the pandemic spreads, partly because of the political winds in the wake of the presidential election and partly because companies themselves are being urged by big business leaders to give greater attention to employee health and safety, as called for by The Business Roundtable statement on stakeholder capitalism in 2019.”
The U.S. Department of Labor’s Occupational Safety and Health Administration issued scores of citations to employers for coronavirus-related violations by Dec. 3, resulting in more than $3.5 million in proposed penalties. Employers were cited for such things as not installing plastic barriers, not ensuring social distancing and failing to report an illness. As of Jan. 8, more than 7,000 COVID-19-related complaints had been filed, with the largest number in New York, California, Texas and Florida, according to the COVID-19 Complaint Tracker database of state and federal litigation by Hunton Andrews Kurth. Nearly 1,200 complaints are related to labor and employment matters.
Despite the lawsuits and regulatory actions, directors appear to be meeting their duty of care to oversee employee health and safety head on, however workers’ criticisms of companies’ operations and performance can be found easily on the internet. Good governance practice dictates that management should report to the board what systems are in place to ensure workplace safety and employee well-being and regularly update the full board or appropriate committee on those processes, says one corporate lawyer who did not want to be named.
This reporting could fall under the Caremark International Inc. precedent decided by the Delaware Court of Chancery, which ruled that a director’s obligation includes a good-faith duty to make certain there are sufficient information and reporting systems so that “appropriate information will come to [the board’s] attention in a timely manner as a matter of ordinary operations.” Directors could, in theory, be held liable for losses if they failed at this obligation.
Employee safety and health “must be an increasing concern [to directors] in light of the pandemic and the additional issues that arise when people are forced to stay at home for long periods,” says Francis Pileggi, managing partner of the Delaware office of Lewis Brisbois Bisgaard & Smith.
Charisse Lillie, a director of PECO Energy Co., a subsidiary of Exelon Corp.,; Penn Mutual Life Insurance and Independence Health Group, says all the boards on which she serves have always taken a substantial role in overseeing employee health and safety.
In Lillie’s opinion, directors aren’t getting more directly involved in what traditionally is considered a management function.
“But we are certainly reviewing a lot of information regarding steps by management to respond to the challenges of running a business during a pandemic,” says Lillie, who is a lawyer and retired vice president of human resources for Comcast Corp.
Michael Rice, a director of the newly-public company Utz Brands snack food company and the former CEO and chairman, sums up the thinking of board members regarding their role in employee health and well-being.
“I think the groundwork and framework of actions to be taken will still be primarily the responsibility of key operating managers, but formal discussions, review and approval will need to be done at the board level,” says Rice, who is the grandson of the company’s founders.
Laura Hamill, chief people officer at Limeade, a software company focused on employee experience, says directors are most concerned about employee stress and burnout, employee engagement, changes in office locations and workspaces and how to maintain the company culture in a dispersed workforce.
“Directors should absolutely ask organizations how they are measuring the well-being and burnout levels of their employee base. They also should be asking what specific actions they are taking to address the well-being issues their employees are facing,” Hamill says.
Indeed, the pandemic is challenging the shareholder primacy governance model that has existed for decades, according to Lynn S. Paine, a Harvard Business School professor of business administration. Going forward, boards will find it harder to put shareholders above all the other stakeholders, she wrote in “COVID-19 Is Rewriting the Rules of Corporate Governance,” an article in the Harvard Business Review in October.
“The crisis has demonstrated that the ‘primacy’ of one group or the other cannot be fixed once and for all. In the life of a company, there are times when employee interests must come first, times when customer interests should take priority, times when public need is paramount, and times when the interests of shareholders should be the prime concern,” she wrote.
According to a BDO Board Pulse Survey in the fall of 2020, nearly three-quarters of boards said “ensuring employee welfare” was the top ESG (environmental, social and governance) priority for the next 12 to 18 months. “The safety of stakeholders — including employees, customers and vendors — is today’s #1 governance oversight challenge and priority.”
Hamill says she connects frequently with the Limeade board to discuss workforce issues, “meeting formally every quarter this year, but having multiple meetings where we discuss these issues in between.”
Dawn Zier, a director of The Hain Celestial Group Inc., Spirit Airlines Inc. and Prestige Consumer Healthcare Inc., says the pandemic has forced directors to address “the heart of our business — our people.
“Both the pandemic and diversity issues have brought human capital conversations front and center to boardrooms across America. Today the discussion is much more robust, and I am finding that on most of my boards, we are discussing people and culture at every meeting in a much more meaningful way,” Zier says.
In the beginning of the pandemic, board discussion focused on how to ensure the staff could work productively from home without always being “on,” she says. Work boundaries were created and flexibility was increased for employees juggling remote work with the need to supervise children learning at home. For essential workers, steps were taken to ensure safety and cleaning protocols at the facilities. Procedures were put in place for actions to be taken if someone were to get sick.
“One of the things that the management teams did exceptionally well on the boards that I serve was around continuously checking the pulse of the employee with frequent outreaches and surveys to gauge how they were doing and to address concerns or share what was working well,” Zier says.
The stakes are high, she says.
“The social and human capital issues that management teams are currently facing will have profound impact on business moving forward, and it’s important that these topics be discussed regularly in the boardroom.”
Can’t yoga your way out
Boards appear to know that workers are suffering, whether they are working on site or not.
What’s more, employees are looking to their organizations as a source of support, according to “Employee Well-Being in the Age of COVID-19: What Your People Want You to Know,” a study by Limeade. Hamill says many of her peers in human resources are focusing on emotional well-being and are offering resources they never have offered before.
Six months into the pandemic, 72% of employees reported being burned out as a result of high engagement and low well-being, the Limeade survey found. Indeed, 38% said their battle with burnout is now one of the most stressful aspects of the job.
“Burnout is real and there are signs to watch for — when employees are exhausted, cynical and don’t feel like they are making a difference,” Hamill says. “Burnout rates are way higher compared to a year ago, and the primary causes of burnout are organizational in nature — work overload, trust breakdowns and perceptions of unfairness.”
What’s more, 58% of workers report they live with at least one “vulnerable” person, including people working in health care or essential jobs, people over 65 and immunocompromised individuals, according to a SHRM survey on the impact of the pandemic on mental health.
To help, many companies now offer such things as yoga classes, Tai Chi, breathwork sessions and meditation classes, according to Glassdoor Inc. Some companies are offering virtual events to help employees deal with anxiety during the pandemic. But organizations shouldn’t put the burden on employees to figure it out on their own, Hamill says.
“You can’t yoga your way out of burnout,” she says.
The World Health Organization now lists burnout as an official medical diagnosis in its International Classification of Diseases. The organization defines burnout as an “occupational phenomenon” resulting from “chronic workplace stress that has not been successfully managed.”
Preserving the female workforce
As the pandemic has worn on, it’s become clear that working women are being disproportionately affected. “The differences in shared experiences between male and female managers during the pandemic are staggering,” the Limeade study says.
The job of overseeing children’s remote schooling and the duties of caregiving often falls on women’s shoulders. The crumbling of the wall between the job and home life has created more stress for those working at home.
Only 11% of women reported “extremely positive” well-being, compared with 42% of men, according to Limeade. Male managers were also more relaxed about asking for time off to care for themselves, what used to be facetiously called a “mental health day” before the pandemic. Consider that 60% of male managers said they were “extremely comfortable” asking for a day off to “benefit their well-being,” while only 25% of women managers felt that way. The SHRM study found that 48% of women feel used up at the end of the day, compared with 41% of men.
“Male and female managers are living wildly different remote work experiences,” the Limeade study reported.
Dawn Zier says the condition of the working mom keeps her up at night. “No one has been impacted more than the working mom. The pressures of working at home, kids being schooled at home, daycare issues and lack of professional-personal boundaries have been overwhelming. We are seeing many moms taking a timeout from the workforce, and this will create a significant gender gap at senior management levels over the next 10 years. We have to track carefully why people are voluntarily opting out of the workforce and work towards flexible options that alleviate pressure points and allow them to stay in.”
In fact, the labor participation of women with children dropped dramatically in 2020. Altogether, there were 2.2 million fewer women in the labor force in October 2020 than in October 2019.
While the C-suite is key to setting the corporate culture, the board can help managers navigate people issues they’ve never encountered before, Zier says. For example, at the beginning of the pandemic, a survey by the National Association of Corporate Directors found that collaboration with management was likely to be less hierarchical with lines between the board and management more fluid.
“They are tapping into their directors as sounding boards on how to handle complex issues and keeping their boards informed,” Zier says.
In the beginning of the pandemic there was lot of discussion around understanding the CARES Act and how to proceed, she says. Several of Zier’s boards have discussed the struggles of women workers and ways to monitor women opting out of the workforce. They also discussed solutions to individually retain women employees.
Zier is also concerned about the negative impact on young adult workers. According to the study by SHRM, nearly half of Gen Z employees, or those born after 1996, reported feeling emotionally drained from work, compared to 29% of baby boomers.
“I worry about the mental health of the 20- to 30-year-old singles whose social life often revolves around the workplace,” Zier says. “It’s ironic that this group has often advocated for a more flexible work environment, but it’s not healthy for them to be locked inside an apartment working without human interaction. Also, as people are rising up in their career, it’s hard to prove they’re a star over Zoom.”
The 2021 reality
Moving ahead, decision making at the board level will become more complicated. Already, the amount of time directors spend deliberating, including exploring various options and competing perspectives, has increased, according to Paine in her Harvard Business Review article. General rules and simple formulas are not easily applied in the case of COVID.
“That’s, in part, because boards are having to deal with novel issues and matters for which they have no precedent or policy,” Paine writes.
Yet, as of September, 87% of boards had not delegated COVID-19 oversight to one specific committee, according to the BDO Board Pulse Survey. This indicates that the full board and management team are needed for the recovery. Of the strategies implemented in 2020, 69% reported additional workplace safety procedures.
Early in the pandemic, research showed that companies with a strong corporate culture did better than their peers without a robust culture. Researchers call a flourishing culture an “intangible asset” that is designed to meet unforeseen events.
“We posit that corporate culture matters even more in a challenging operational environment such as the COVID-19 pandemic because a strong culture empowers executives and rank-and-file employees to make consistent decisions and efforts based on long-term perspectives,” says Tengfei Zhang, one of the authors of the research report “The Role of Corporate Culture in Bad Times: Evidence from the COVID-19 Pandemic.”
Because the impact of the pandemic extends beyond the workplace, boards and managers will have to create a culture where employees are comfortable coming forward. For example, when it comes to remote work, 41% report dissatisfaction with their work-family balance, according to SHRM research. Thirty-eight percent of those who don’t telework reported dissatisfaction.
Limeade’s Laura Hamill recommends that organizations work on building trust and demonstrating that they care about their employees as they navigate the new normal for work — whatever it will be.
“At Limeade, our annual employee summit was focused on individual and company-wide resilience. We discussed as a company how hard this year has been and how important it is to learn resilience skills. In general, we continue to focus on showing our employees that we care about them,” Hamill says.
What’s more, things once considered nice to have, such as telehealth and mental health services, are now must-haves, according to BDO benefits outlook for 2021.
“Never has communication from the top been more important,” Dawn Zier says. “I am finding that because the teams are not physically together, the best CEOs are reaching out and checking in on their teams through weekly town halls, regular communication updates, and engagement surveys where they are soliciting feedback on how their teams are doing with actionable follow through. These findings and action plans are being discussed at the board level.”