Published November 7, 2024 in Governance • 6 min read • 
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In February 2017, Susan Fowler, a former engineer at ride-hailing company Uber, went public with allegations of sexual harassment. That same month, the self-driving car company Waymo accused Uber of calculated theft of its intellectual property. Over the next four months, a litany of further scandals rocked the company: co-founder and CEO Travis Kalanick was caught yelling at a driver, news leaked of a secret program to spy on rivals, and the company admitted it had underpaid drivers in New York for more than two years.
Where was the board during this tumultuous time? By all accounts, they were distracted by infighting over the best way to handle the situation. Some board members publicly backed Kalanick, regarded as a Silicon Valley wunderkind, while others pushed for his departure. The disagreement, accusations, and indecision thwarted any attempts to address underlying issues at the company and exacerbated the crisis. In June 2017, facing mounting pressure from frustrated top investors, Kalanick stepped down as CEO.
Most board directors will have to handle a crisis at some point during their tenure, whether this is an operational crisis such as the BP Deepwater Horizon environmental disaster, a regulatory crisis like the Volkswagen emissions scandal, or personal matters such as Kalanick at Uber or Elon Musk’s erratic behavior at Tesla.
In every crisis, there is an increase in speed, complexity, and uncertainty. Whether the crisis unravels as a creeping downward slide (like at Uber) or erupts as a surprise sudden shock, such as a cybersecurity breach, it will fundamentally challenge the dynamics between board members and the way they make decisions.
Of course, the best boards will prepare for a crisis long before it hits. They will draw up contingency plans and communication protocols and lay out how to restore operations during times of severe stress. When the crisis comes, they will set up a crisis management team, reassess priorities, and assume a more active role to ensure robust governance. Once the crisis is over, they will drill down into the leadership and cultural issues that may have caused it to strengthen future resilience.
Yet, for all the planning, board members can feel buffeted by the immense pressure, conflicting information, and uncertainty when a crisis arrives. They may face overwhelming emotional responses and the pull of herd thinking. These “soft factors” – human behavior, emotional stress, and challenging group dynamics – can overshadow even the best-laid plans.
Effective crisis management hinges on mastering these soft factors just as much as getting the other elements right. So, how can board members navigate the intense pressure and their emotional state? While there are no hard and fast rules, boards would do well to focus on these four key aspects.
“Recognizing the full toll of a crisis is vital. The board must address the leadership’s emotional, physical, and psychological well-being.”
When a business is in crisis, board directors must roll up their sleeves and step into the action. This doesn’t mean they should overstep the mark by micromanaging every decision the CEO makes or lose sight of the long-term vision. Rather, boards must be ready to adapt to the needs, timelines, and capabilities of the CEO and executive team. On these occasions, weekly, if not daily, meetings and an intensified committee workload will be the rule rather than the exception. In extreme (typically last resort) situations, board members may need to assume executive roles. This might be the case when the CEO or key executives are the source of the crisis or are unable to lead effectively. In 2019, Peter Voser, then chairman of Swiss engineering group ABB, became interim CEO when the incumbent agreed with the board to step down. Voser’s confident leadership helped ABB to navigate a challenging restructuring process, maintain employee morale, and focus on long-term goals until a new CEO was appointed.
A good relationship between the chair, board members, and CEO is key, but never more so than in times of crisis. Trust and proactive communication are crucial for the board to oversee and support management decisions effectively. At the same time, the board has a responsibility to preserve its independence, assessing all available options thoroughly to make swift decisions based on the available information at the time. The chair and select directors should also establish direct relationships with key stakeholders, such as investors, clients, regulators, and government bodies, ensuring the board’s independence and oversight role. Further, they should allocate resources and support for critical third-party assistance to maintain this balance during challenging times.
In a crisis, the stakes are high, emotions run deep, and the pressure on the board and senior management can feel overwhelming. Careers and reputations are on the line, with the threat of job losses and potential long-term legal action. Yet, these very moments can forge unity and solidarity within teams. The chair’s pivotal role is to create a safe place for open challenge and dialogue, remaining accessible to fellow directors, the CEO, and senior executives. They serve as a crucial conduit between the board and senior management, ensuring the board stays informed without swamping management with demands. Recognizing the full toll of a crisis is vital. The board must address the leadership’s emotional, physical, and psychological well-being. Vigilance for early warning signs – denial, blame-shifting, or trivial distractions – is essential, requiring tactful intervention. Promoting norms for respectful communication and decision-making can mitigate emotional reactions. In highly charged situations with emotional outbursts and overreactions, providing space for board members and executives to express and work through their emotions can refocus efforts on critical tasks. By upholding values of empathy, compassion, and care, the organization encourages openness and sharing personal challenges, normalizing vulnerability as a strength.
Board directors and senior leaders are constantly under scrutiny – not just for their decisions and actions but also for their behavior, commitment, and values. When Deutsche Bank faced financial and legal challenges, CEO John Cryan embraced austerity by agreeing with the board to take a reduced salary and forgo bonuses, aligning with the bank’s cost-cutting measures. Directors and senior leaders must model healthy behaviors and emotional self-regulation, maintain a positive spirit, and avoid negative comments. The chair and CEO, in particular, should present a unified front, showing solidarity and a shared commitment to managing the crisis with confidence and decisiveness. Despite all the challenges, it’s crucial to approach meetings with a positive attitude and productive energy. Effective directors and leaders understand how their emotional responses affect their behavior and strive to maintain high energy levels and reduce stress. Leading by example encourages the company’s executives to mirror this attitude. Staying calm and composed, even in high-pressure situations, sets the tone for the organization. Celebrating small wins and practicing gratitude can also help counteract negative bias.
As seen with Uber, crises often have cascading effects that throw up new risks. The saying “it will get worse before it gets better” often holds true. Situations tend to deteriorate before improving, so boards must rely not just on solid crisis planning and “hard facts” but also be acutely aware of the soft factors that can help or hinder crisis management.
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