During the COVID-19 pandemic, corporate environments were forced to adapt to a new and unknown reality with little guidance. In fact, historically, there has been insufficient research on organizational leadership during a crisis. So, when faced with an unprecedented challenge, such as a global pandemic, an opportunity to research the decision making of board chairs and derive valuable insights arose.
April 04, 2023
By Neeley Analytics Initiative
Ryan Krause, Duncan Faculty Fellow and professor of Strategy in the Neeley School of Business Management and Leadership Department, conducted a research project in order to discover how board chairs and CEOs reacted to the business problems presented by COVID-19. This research led to Krause publishing an article along with Michael C. Withers and Mary J. Waller entitled “Leading the Board in a Crisis: Strategy and Performance Implications of Board Chair Directive Leadership” in the Journal of Management.
In April of 2020, shortly after the official COVID-19 lockdown, Krause surveyed 120 directors across 106 U.S. public firms on the behavior of their board chair (or themselves if they held the position as chair) across a set of well-established leadership questions. After collecting these responses, Krause combined the data with publicly available information pertaining to corporate competitive actions and financial performance.
To determine sound and suitable corporate governance during a crisis, Krause utilized extant theory, explaining how “boards of directors should conduct themselves to oversee their firms effectively during times of great economic, social, or political upheaval.” He found that there are two types of companies that operated successfully during a crisis: one in which the CEO also holds the position of board chair and leads the board in a passive style, and one in which the board chair is not the CEO and leads with a more directive and hands-on style. Krause and his co-authors note that, “directive leadership from the [independent] board chair promotes competitive simplification at the onset of the crisis, which in turn promotes firm financial performance during the crisis.”
In the future, leaders may consult this research on corporate governance in times of calamity in order to remain stable and financially lucrative. In this academic study, Krause leveraged “unique primary data and moderated mediation techniques to develop novel theory regarding how the directive leadership behavior of board chairs determine competitive actions, and, in turn, firm performance during a crisis.” It is not a question of leadership roles, rather, navigating the correct style that fits a given governance structure.
Read the full study from Journal of Management here.